September saw a weak month for global equity markets, as developed markets declined 3.6% in local currency terms, largely driven by the S&P 500 Index which dropped 4.7%. It was the first down month for global equities after 7 consecutive up months. The evolving Evergrande situation led to global uncertainty, driving a sell-off in developer bonds, highlighting potential risk for the banking sector. Iron Ore prices collapsed from US$247/Mt to US$110/Mt, partly as China crude steel demand slowed due to regulatory and decarbonisation related reasons. The US Federal Reserve shifted in the hawkish direction, as they increased signalling of a faster and earlier tapering of asset purchases. This contributed to global bond yields surging, with the US 10-year rising 24bps to 1.52%. Sector wise, energy was the only positive sector and materials the largest underperformer.
The State Street Global Equity Fund outperformed the broader index (MSCI World ex Australia TR Index) in September. From a sector perspective, good stock picking within IT, Communication Services and Materials were key contributors. While having a zero allocation to Energy, and negative stock selection within Health Care and Financials were key detractors. The strategy’s preference for lower risk stocks detracted value in North America and Europe, but was positive in Japan.
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