Global Growth momentum also decelerated toward the end of equity markets were negative in September 2020, pausing their strong recovery since markets bottomed in March. Caution returned to markets as COVID-19 infection rates re-surged in some developed economies, although key vaccine trials continued to make quick progress. the third quarter as global fiscal support waned and services growth remained restricted, given persistent and rising COVID-19 cases. Weakening fiscal support, geo-political concerns related to the US election, and worsening US-China relations remain key risks to recovery providing headwinds to further gains in growth assets. Our outlook does however remain cautiously optimistic.
Within growth assets, local equity markets (S&P/ASX 200 Index – Net Total Return) saw negative returns and were down -3.7% for the month. Global
equity markets were also negative with the US (MSCI US Index – Net Total
Return) and was down -3.8%, whilst Europe (MSCI Europe Index – Net Total
Return) was down -0.9% but Japan (MSCI Japan Index – Net Total Return) managed a small 0.5% gain. Emerging markets (MSCI Emerging Markets Index – Net Total Return) posted negative returns and was down -1.6%, outperforming developed markets. In the fixed income space, Australian government bond yields moved lower as markets expected further action from the Reserve Bank of Australia (RBA) with the 10 year government bond yield lower by 20bps, helping to drive a positive return for corporate bonds locally. Across our alternatives exposures, our investments in both commodities detracted from performance but a weak Australian dollar resulted in positive returns for our emerging markets bonds exposure.
Looking into our average positioning across the portfolio for the month of September, the Growth assets allocations have been approximately 36% for the State Street Multi-Asset Builder Fund. Our exposure preferences in September were to have a diversified exposure to equities, fixed income, alternatives and cash as we seek to balance the strong momentum in equities versus the uncertainty in the economic outlook with the upcoming US election and US/China tensions. Performance wise, our diversified exposures across equities, fixed income and alternatives resulted in the portfolio delivering a marginally negative return in September.
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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.
Source: Bloomberg Finance, L.P., SSGA as at 30 September 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. 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.
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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.
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