Global markets retreated through October 2020, driven by fading stimulus expectations, weak US tech results and rising COVID-19 cases. Utilities, Communication Services and Financials were the only sectors that did not fall, as Energy, IT, and Health Care underperformed. From a regional perspective, European stocks fared the worst – falling sharply as COVID-19 cases surged and as multiple countries entered nationwide lockdowns.
The State Street Global Equity Fund underperformed the broader index in October. From a sector perspective, good stock picking within Discretionary and not holding any Energy names were the key contributors towards relative performance. However, this was more than offset by negative stock selection within Communication Services and Health Care. Currency hedging lost -1.2% as the AUD fell on the back of risk-off market sentiment and dovish RBA comments.
Year to date, underperformance has been concentrated in two cohorts – the very expensive (where we are underweight) and the very cheap (where we are overweight). The strategy aims to minimise total portfolio volatility and as part of achieving that objective we have avoided the most expensive, high sentiment segments of the market that harbor higher valuation risks. While COVID-19 and central bank interventions have exacerbated certain trends that favoured the most expensive, high sentiment (stay-at-home) stocks, our current positioning (in reasonably valued, higher quality stocks with positive sentiment) reflects our strong conviction that these market imbalances will inevitably revert. As such, we stand by our belief that a risk-aware strategy requires a balanced view of return drivers.
Issued by State Street Global Advisors, Australia Services Limited (AFSL Number 274900, ABN 16 108 671 441) (“SSGA, ASL”). Registered office: Level 14, 420 George Street, Sydney, NSW 2000, Australia · Telephone: +612 9240-7600 · Web: www.ssga.com. State Street Global Advisors, Australia, Limited (AFSL Number 238276, ABN 42 003 914 225) (“SSGA Australia”) is the Investment Manager.
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, available at www.ssga.com, before deciding whether to acquire or continue to hold units in the Funds.
This material should not be considered a solicitation to apply for interests in the Funds and investors should obtain independent financial and other professional advice before making investment decisions. There is no representation or warranty as to the currency or accuracy of, nor liability for, decisions based on such information.
All information is from SSGA unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed.
Source: Bloomberg Finance, L.P., SSGA as at 31 October 2020. Past performance is not a reliable indicator of future performance. This information should not be considered a recommendation to buy or sell any security or sector shown. It is not known whether the securities or sectors shown will be profitable in the future. 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.
Investing involves risk including the risk of loss of principal. Risk associated with equity investing includes stock values which may fluctuate in response to the activities of individual companies and general market and economic conditions.
Past performance is not a reliable indicator of future performance. This information should not be considered a recommendation to buy or sell any security or sector shown. It is not known whether the securities or sectors shown will be profitable in the future. 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.
Currency Risk is a form of risk that arises from the change in price of one currency against another. Whenever investors or companies have assets or business operations across national borders, they face currency risk if their positions are not hedged. The Portfolio may, but will not necessarily, invest in currency exchange contracts or other currency-related transactions (including derivatives transactions) to reduce exposure to different currencies. These contracts may reduce or eliminate the benefit that the Portfolio may experience from favorable currency fluctuations.
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