Are you sure you want to change languages?
The page you are visiting uses a different locale than your saved profile. Do you want to change your locale?
Q1 Update: Sector Selection Research Model
On a quarterly basis, we provide an update on our Sector Selection Research Model. Read on to learn more about recent US, Europe and World sector allocations based on price, macroeconomic and fundamental factors.
Below readers can find commentary on the key changes to our Sector Selection Research Model (SSRM) across US, Europe and World sectors. This is done as an update to the thought leadership piece we published on Sector Rotation: Can the Approach Work in Different Countries?
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 allocated mostly to Materials this month, due to the highest flows witnessed by the sector and given strong 12-month momentum. Momentum continues to have the highest weight in SSRM. Materials also witnessed the highest earnings revision sentiment.
- Utilities saw a slight overweight by virtue of stronger earnings revision sentiment and profit margin.
- The underperformance of the US SSRM this month was mainly due to underweights in Energy and Financials, which saw strong performance. The SSRM’s allocation to Utilities (worst performing sector) also resulted in loss.
Performance of SSRM vs. Benchmark
Source: State Street Global Advisors, Bloomberg Finance L.P., as of March 2021. 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 – January 2021 vs. February 2021
Source: State Street Global Advisors, as of March 2021. Sector selection is based on the methodology Sector Rotation: Can the Approach Work in Different Countries?
Research Model Allocation Decisions – Current Month*
Source: State Street Global Advisors, as of March 2021. Sector selection is based on the methodology Sector Rotation: Can the Approach Work in Different Countries?
Europe Sector Allocation
- The Strategy was slightly overweight in Consumer Discretionary and Financials mainly due to strong flows in the two sectors, as well as due to strong 12-month momentum in Consumer Discretionary.
- Consumer Discretionary also had a strong profit margin, whereas Financials had strong earnings revision sentiment.
- The slight overweight in Utilities was due to the highest earnings revision sentiment the sector witnessed compared to all the other sectors.
- The underweight to Consumer Staples was mainly due to lack of 12-month momentum and earnings revision sentiment.
Performance of SSRM vs. Benchmark
Source: State Street Global Advisors, Bloomberg Finance L.P., as of March 2021. 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 MSCI Europe 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 – January 2021 vs. February 2021
Source: State Street Global Advisors, as of March 2021. Sector selection is based on the methodology in the paper, Sector Rotation: Can the Approach Work in Different Countries?
Research Model Allocation Decisions – Current Month*
Source: State Street Global Advisors, as of March 2021. Sector selection is based on the methodology Sector Rotation: Can the Approach Work in Different Countries?
World Sector Allocation
- The Strategy had a strong overweight in Consumer Discretionary primarily due to strong 12-month momentum and modest flows and ROE compared to other sectors.
- Materials had a slight overweight thanks to strong 12-month momentum and flows. Tech was underweight mainly due to the least amount of flows witnessed by the sector.
- Like the US SSRM, the World SSRM strategy underweighted Energy and Financials sectors, which were the best performers last month. The underperformance of the strategy was also due to a slight overweight in Utilities, the worst performing sector in the last month.
Performance of SSRM vs. Benchmark
Source: State Street Global Advisors, Bloomberg Finance L.P., as of March 2021. 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 MSCI World 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 – January 2021 vs. February 2021
Source: State Street Global Advisors, as of March 2021. Sector selection is based on the methodology Sector Rotation: Can the Approach Work in Different Countries?
Research Model Allocation Decisions – Current Month*
Source: State Street Global Advisors, as of March 2021. Sector selection is based on the methodology Sector Rotation: Can the Approach Work in Different Countries?
*Key: Over-/Underweight (versus corresponding benchmark)
ssga.com
Marketing Communication. For professional investor use only.
Important Information
France: State Street Global Advisors Ireland Limited, Paris branch is a branch of State Street Global Advisors Ireland Limited, registered in Ireland with company number 145221, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street Global Advisors Ireland Limited, Paris Branch, is registered in France with company number RCS Nanterre 832 734 602 and whose office is at Immeuble Défense Plaza, 23-25 rue Delarivière-Lefoullon, 92064 Paris La Défense Cedex, France. T: (+33) 1 44 45 40 00. F: (+33) 1 44 45 41 92.
Germany: State Street Global Advisors GmbH, Brienner Strasse 59, D-80333 Munich. Authorised and regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht (“BaFin”). Registered with the Register of Commerce Munich HRB 121381. T: +49 (0)89-55878-400. F: +49 (0)89-55878-440.
Israel: No action has been taken or will be taken in Israel that would permit a public offering of the Securities or distribution of this sales brochure to the public in Israel. This sales brochure has not been approved by the Israel Securities Authority (the ‘ISA’). Accordingly, the Securities shall only be sold in Israel to an investor of the type listed in the First Schedule to the Israeli Securities Law, 1978, which has confirmed in writing that it falls within one of the categories listed therein (accompanied by external confirmation where this is required under ISA guidelines), that it is aware of the implications of being considered such an investor and consents thereto, and further that the Securities are being purchased for its own account and not for the purpose of re-sale or distribution. This sales brochure may not be reproduced or used for any other purpose, nor be furnished to any other person other than those to whom copies have been sent. Nothing in this sales brochure should be considered investment advice or investment marketing as defined in the Regulation of Investment Advice, Investment Marketing and Portfolio Management Law, 1995 (“the Investment Advice Law”). Investors are encouraged to seek competent investment advice from a locally licensed investment advisor prior to making any investment. State Street is not licensed under the Investment Advice Law, nor does it carry the insurance as required of a licensee thereunder. This sales brochure does not constitute an offer to sell or solicitation of an offer to buy any securities other than the Securities offered hereby, nor does it constitute an offer to sell to or solicitation of an offer to buy from any person or persons in any state or other jurisdiction in which such offer or solicitation would be unlawful, or in which the person making such offer or solicitation is not qualified to do so, or to a person or persons to whom it is unlawful to make such offer or solicitation. Investing involves risk including the risk of loss of principal. 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’s express written consent. 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.
Ireland: State Street Global Advisors Ireland Limited is regulated by the Central Bank of Ireland. Registered office address 78 Sir John Rogerson’s Quay, Dublin 2. Registered Number: 145221. T: +353 (0)1 776 3000. F: +353 (0)1 776 3300.
Italy: State Street Global Advisors Ireland Limited, Milan Branch (Sede Secondaria di Milano) is a branch of State Street Global Advisors Ireland Limited, registered in Ireland with company number 145221, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street Global Advisors Ireland Limited, Milan Branch (Sede Secondaria di Milano), is registered in Italy with company number 10495250960 - R.E.A. 2535585 and VAT number 10495250960 and whose office is at Via Ferrante Aporti, 10 - 20125 Milano, Italy. Telephone: +39 02 32066 100. Facsimile: +39 02 32066 155.
Netherlands: State Street Global Advisors Netherlands, Apollo Building, 7th floor Herikerbergweg 29 1101 CN Amsterdam, Netherlands. Telephone: 31 20 7181701. SSGA Netherlands is a branch office of State Street Global Advisors Ireland Limited, registered in Ireland with company number 145221, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2.
Switzerland: State Street Global Advisors AG, Beethovenstr. 19, CH-8027 Zurich. Authorised and regulated by the Eidgenössische Finanzmarktaufsicht (“FINMA”). Registered with the Register of Commerce Zurich CHE-105.078.458. T: +41 (0)44 245 70 00. F: +41 (0)44 245 70 16.
United Kingdom: State Street Global Advisors Limited. Authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No. 2509928. VAT No. 5776591 81. Registered office: 20 Churchill Place, Canary Wharf, London, E14 5HJ. T: 020 3395 6000. F: 020 3395 6350.
Standard & Poor’s, S&P and SPDR are registered trademarks of Standard & Poor’s Financial Services LLC (S&P); Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC (Dow Jones); and these trademarks have been licensed for use by S&P Dow Jones Indices LLC (SPDJI) and sublicensed for certain purposes by State Street Corporation. State Street Corporation’s financial products are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates and third party licensors and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability in relation thereto, including for any errors, omissions, or interruptions of any index.
All forms of investments carry risks, including the risk of losing all of the invested amount. Such activities may not be suitable for everyone.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor.
This document contains certain statements that may be deemed forward looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
Issuing Office: This document has been issued by State Street Global Advisors Ireland (“SSGA”), regulated by the Central Bank of Ireland. Registered office address 78 Sir John Rogerson’s Quay, Dublin 2. Registerednumber 145221. T: +353 (0)1 776 3000. Fax: +353 (0)1 776 3300. Web: ssga.com.
ETFs trade like stocks, are subject to investment risk and will fluctuate in market value. The investment return and principal value of an investment will fluctuate in value, so that when shares are sold or redeemed, they may be worth more or less than when they were purchased. Although shares may be bought or sold on an exchange through any brokerage account, shares are not individually redeemable from the fund. Investors may acquire shares and tender them for redemption through the fund in large aggregations known as “creation units.” Please see the fund’s prospectus for more details.
Past Performance is not a guarantee of future results.
SPDR ETFs is the exchange traded funds (“ETF”) platform of State Street Global Advisors and is comprised of funds that have been authorised by Central Bank of Ireland as open-ended UCITS investment companies.
The information contained in this communication is not a research recommendation or ‘investment research’ and is classified as a ‘Marketing Communication’ in accordance with the Markets in Financial Instruments Directive (2014/65/EU). This means that this marketing communication (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research (b) is not subject to any prohibition on dealing ahead of the dissemination of investment research.
© 2021 State Street Corporation. All Rights Reserved.
3138068.4.1.EMEA.INST
Exp. Date: 31/03/2022