Global equities rebounded in July, driven by a positive US reporting season and GDP contraction which softened investor expectations of the pace of future rate hikes. The improvement in investor sentiment was also seen in bond markets, as US bond yields dropped 33bps to 2.64% and long-term inflation expectations remained well anchored. From a sector perspective, Consumer Discretionary, IT & Industrials were relative outperformers while Communication Services and Health Care lagged the broader market.
The State Street Global Equity Fund underperformed the MSCI World ex Australia Index during July.1 From a model perspective, quality factors remained positive but sentiment, value and low risk factors were largely unrewarded as investors pivoted towards cyclical growth stocks. From a country and sector perspective, being underweight US Tech, US Discretionary and US Health Care were key detractors. On the other hand, being underweight Hong Kong Financials, UK Health Care and good stock picking in German Health Care were key contributors towards relative performance. The dynamic currency hedging overlay added 0.9% during the month largely due to a stronger AUD (vs USD).
During the month, we marginally increased our allocation to select Utilities and Energy names as part of regular rebalancing – including DTE and Consolidated Edison. At the same time, we have decreased some of our positions in the Industrials and Health Care – such as building product company Johnson Controls and logistics company Deutsche Post, mainly as a result of falling Sentiment scores.
1Source: SSGA as of 30 June 2022. Past performance is not a reliable indicator of future performance. Performance returns for periods of less than one year are not annualized. The performance figures contained herein reflect Total Returns and are provided on a net of fees basis. Performance figures are calculated using end-of-month exit prices and assume the reinvestment of distributions and make no allowance for tax. Net performance figures are after management and transaction costs. Index returns are unmanaged and do not reflect the deduction of any fees or expenses. Index returns reflect all items of income, gain and loss and the reinvestment of dividends and other income as applicable.
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References to the State Street Global Equity Fund ("the Fund") in this communication are references to the managed investment schemes domiciled in Australia, promoted by SSGA Australia, in respect of which SSGA, ASL is the Responsible Entity. This general information has been prepared without taking into account your individual objectives, financial situation or needs and you should consider whether it is appropriate for you. You should seek professional advice and consider the product disclosure document and target market determination, available at www.ssga.com, before deciding whether to acquire or continue to hold units in the Funds.
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Characteristics are as of the date indicated, subject to change, and should not be relied upon as current thereafter.
Index returns are unmanaged and do not reflect the deduction of any fees or expenses. Index returns reflect all items of income, gain and loss and the reinvestment of dividends and other income.
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