Global equities saw sharp falls over November 2021 (in local currency terms), driven by the emergence of the Omicron variant towards month-end as fears of more lockdowns compounded investors’ growth concerns when the cycle was already slowing.  To top it off, on the last day of the month, Fed chair Powell signaled tapering may be accelerated as inflation is less transitory than first thought. This double whammy was a headwind for risk assets and flattened yield curves. Investors swiftly began their move into safe-haven asset classes. While the MSCI World ex Australia Index ended the month down (in local currency), in AUD terms the benchmark remained in positive territory as the AUD depreciated against the USD. Growth indices outperformed Value indices in November. The stronger returns from Growth were driven by higher quality, more defensive names in that basket; as the more risky, cyclical Value names underperformed on the back of falling oil prices and declining bond yields.

The State Street Global Equity Fund underperformed the MSCI World ex Australia Index during November. The underperformance was largely due to impacts of the dynamic currency hedging overlay, as the falling AUD disproportionally benefited the unhedged benchmark (relative to the fund which is partially hedged). From a sector perspective, good stock picking within Industrials and Health Care were key contributors, but was offset by our lower than benchmark allocation to IT and negative stock selection within Discretionary and Materials. At a more granular level, good stock picking within US Industrials, US Financials and German Health Care added the most value, while having a lower weight to US IT and US Discretionary detracted the most value.

Notable changes during the month:
During the month, we made a minor increase to our allocation in Staples, notably in packaged food producer Tyson Foods on the back of strong expected return expectations and lower risk forecast. At the same time, we trimmed our allocation to Communication Services by reducing our positions in select Swiss and Dutch telecom names as outlook and sentiment deteriorated somewhat.