As a reminder, the SSRM deploys a rule-based, sector rotation approach that targets the most relatively attractive sectors using a blend of price, macroeconomic and fundamental factors. The importance of these selection factors is captured in the dynamic weighting scheme of the research model.
Furthermore, the model provides for a mechanism that ensures risk is controlled and opportunities arising from dispersion are seized. In all, the approach comprises two major steps: sector selection and sector weighting.
US Sector Allocation
The strategy had an overweight in Materials and Consumer Discretionary, thanks to strong momentum (both price action and flows).
Consumer Discretionary also scored highly on the macroeconomic factor.
The underperformance of SSRM versus the benchmark was largely due to an underweight of Technology and Materials in May and Consumer Discretionary in July.
Performance of SSRM vs. Benchmark
US Sector Selection Research model (NTR)
S&P 500 (NTR)
Rolling 1 Year Return
Rolling 1 Year Risk
Source: State Street Global Advisors, Bloomberg Finance L.P., as of September 2020. Past performance is no guarantee of future results. It is not possible to invest directly into an index. Index returns are unmanaged and do not reflect the deduction of any fees or expenses. Returns do not represent those of the Portfolios but were achieved by mathematically combining the actual performance data of the sector indices that make up the S&P 500 Index, based on the methodology in the research paper: Sector rotation: Can it work in different countries? The performance does not include costs, so actual results will differ
SSRM Sector Allocation – August 2020 vs. September 2020