Global equity markets experienced uncertainty over January 2021 as risky assets rallied over the first two weeks of the month buoyed by the clarity of the US election, but by the middle of the month reversed direction as markets saw concerns surrounding mutations of COVID-19 and complexities related to the vaccine rollout. COVID-19 infections did slow in the US and Europe amid strict lockdowns, but case numbers continued to remain high in key economies such as the UK, France and Italy. In China, new cases were registered in northern provinces leading to tighter restrictions extending up to the lunar year season.
SSGA’s Market Risk Indicator (MRI) was largely consistent with these moves over the month and finished January 2021 in Low Risk Regime. The signal started in Low Risk Regime and gradually moved lower for most of the month but spiked in the last few days of January, consistent with the sell-off in equities towards the end of the month. On the economic front, economic momentum slowed in the United States and Europe owing to higher infection rates caused by virus mutation and complexities related to the vaccine rollout. Despite these risks, continued monetary and fiscal policy support as well as an expected pick up in vaccination efforts provided robust support for the recovery process. Manufacturing and exports continued to lead the growth recovery in China albeit new COVID-19 outbreaks posing risks to this momentum. Looking forward, we continue to expect a strong global economic recovery as the vaccine is implemented globally, thus our outlook remains optimistic.
Within growth assets, local equity markets (S&P/ASX 200 Net Total Return Index) saw positive returns, and were up 0.3% for the month. Global equity markets were largely negative with the US (MSCI US Net Total Return Local Index) down -1.0%, Europe (MSCI Europe Net Total Return Local Index) down -1.0% but Japan (MSCI Japan Net Total Return Local Index) posted a positive 0.4% return. Emerging markets (MSCI EM Index Net Total Return Local Index) posted another strong return, up 3.8% over the month. In the fixed income space, Australian government bond yields were again mixed as shorter duration bond yields were flat whilst longer duration yields continued their move higher over the month. Our exposures to credit with a shorter duration profile, posted marginally positive returns for the month. Across our alternatives exposures, our investments in commodities added strongly to performance but our emerging markets bonds exposure posted negative returns, with both positively affected by a weaker Aussie dollar.
Looking into our average positioning across the portfolio for the month of January, the Growth assets allocations have been approximately 69% for the State Street Multi-Asset Builder Fund. Our exposure preferences in January were an overweight exposure to equities but we maintained a diversified exposure to fixed income, alternatives and cash across the remainder of the portfolio. Performance wise, our diversified exposures across equities, fixed income and alternatives resulted in the portfolio delivering a marginally negative return in January.
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: 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 Multi-Asset Builder Fund (APIR: SST0052AU) in this document 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.
The views expressed in this material are the views of the Investment Solutions Group through the period ended 31 January 2021 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
Source: Bloomberg Finance, L.P., SSGA as at 31 January 2021. 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. Risks associated with equity investing include stock values which may fluctuate in response to the activities of individual companies and general market and economic conditions. Investing in foreign domiciled securities may involve risk of capital loss from unfavorable fluctuation in currency values, withholding taxes, from differences in generally accepted accounting principles or from economic or political instability in other nations.
Investments in emerging or developing markets may be more volatile and less liquid than investing in developed markets and may involve exposure to economic structures that are generally less diverse and mature and to political systems which have less stability than those of more developed countries.
Although bonds generally present less short-term risk and volatility risk than stocks, bonds contain interest rate risks; the risk of issuer default; issuer credit risk; liquidity risk; and inflation risk. This effect is usually pronounced for longer-term securities. Any fixed income security sold or redeemed prior to maturity may be subject to a substantial gain or loss.
Asset Allocation is a method of diversification which positions assets among major investment categories. Asset Allocation may be used in an effort to manage risk and enhance returns. It does not, however, guarantee a profit or protect against loss. Investments in issuers in different countries are often denominated in different currencies. Changes in the values of those currencies relative to the Strategy’s base currency may have a positive or negative effect on the values of the Portfolio’s investments denominated in those currencies. The Strategy 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, take or eliminate some or all of the
benefit that the Strategy may experience from favorable currency fluctuations.
Investing in commodities entail significant risk and is not appropriate for all investors. Commodities investing entail significant risk as commodity prices can be extremely volatile due to wide range of factors. A few such factors include overall market movements, real or perceived inflationary trends, commodity index volatility, international, economic and political changes, change in interest and currency exchange rates.
Derivative investments may involve risks such as potential illiquidity of the markets and additional risk of loss of principal.
Bloomberg Finance L.P. and its affiliates (collectively, “Bloomberg”) do not approve or endorse this material and disclaim all liability for any loss or damage of any kind arising out of the use of all or any part of this material.
Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC ("S&P") and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC ("Dow Jones") and have been licensed for use by S&P Dow Jones Indices LLC and sublicensed by SSGA. The S&P/ASX indices are a product of S&P Dow Jones Indices LLC, and has been licensed by SSGA. The SSGA strategies contained within are not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, Dow Jones, S&P, their respective affiliates, and none of S&P Dow Jones Indices LLC, Dow Jones, S&P, nor their respective affiliates make any representation regarding the advisability of investing in such product(s).
MSCI indices are the exclusive property of MSCI Inc. ("MSCI"). MSCI and the MSCI index names are service mark(s) of MSCI or its affiliates and have been licensed for use for certain purposes by State Street Global Advisors ("SSGA"). The financial securities referred to herein are not sponsored, endorsed, or promoted by MSCI, and MSCI bears no liability with respect to any such financial securities. No purchaser, seller or holder of this product, or any other person or entity, should use or refer to any MSCI trade name, trademark or service mark to sponsor, endorse, market or promote this product without first contacting MSCI to determine whether MSCI's permission is required. Under no circumstances may any person or entity claim any affiliation with MSCI without the prior written permission of MSCI.
The trademarks and service marks referenced herein are the property of their respective owners. Third party data providers make no warranties or representations of any kind relating to the accuracy, completeness or timeliness of the data and have no liability for damages of any kind relating to the use of such data.
The Market Risk Indicator (MRI) is a quantitative framework that attempts to identify the current market risk environment based on forward‐looking market indicators. We believe the factors used, equity implied volatility, currency pairs implied volatility and bond spreads, are good indicators of the current risk environment as they are responsive to real‐time market impacts and in theory should include all current and forward views of those markets. These factors are combined to create a single measure and used to identify one of five risk regimes: Euphoria, Low Risk, Normal, High Risk, and Crisis.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA Australia’s express written consent.
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