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SPDR® SSGA Global Allocation ETF (GAL) – Q4 2023 Commentary

During the fourth quarter of 2023, GAL returned 8.87% on a NAV basis. The fund finished the quarter with an overweight to equities and cash, a modest overweight to gold, and an underweight to broader commodities. Within fixed income, the fund had targeted allocations to intermediate and long Treasuries. Within equities, the fund favored the US and emerging markets.


Sector selection was the largest detractor to relative performance and offset positive tactical decisions elsewhere. The underperformance was primarily driven by an allocation to Energy, which we held throughout the quarter. Despite the pullback in oil prices, Energy was buoyed by positive macroeconomic factors, attractive valuations, and robust price momentum. Record production from US shale companies and concerns about future demand offset support from OPEC+ production cuts and resilient current demand which pushed the sector lower. Elsewhere, an overweight to cash and underweight to REITs dented performance. We reduced our position to cash during the quarter, mostly to increase our overweight to equities, but maintained a modest allocation. While the rotation into equities was beneficial, cash materially underperformed both equities and bonds leading to a drag on performance from the underweight. On the positive side, we maintained a healthy allocation to equities throughout the quarter due to positive risk appetite and constructive forecasts from our quantitative model. Poor equity performance from Q3 carried over into October, but a meaningful rally in markets in November and December sent equities higher, up double digits, and they outperformed bonds. Within real assets, an underweight to broad commodities and an overweight to gold aided performance. We held gold throughout the quarter and strong central bank buying, uncertainty in the Middle East, and increased optimism for aggressive Fed rate cuts in 2024, which brought real yields off their October highs, sent gold higher.

Fund Performance

  As Of  QTD (%) YTD (%) 1 Year (%) 3 Year (%) 5 Year (%) 10 Year (%) Since Inception (%)
NAV Dec 31 2023 8.87 13.51 13.51 3.34 7.49 5.27 6.08
Market Value Dec 31 2023 8.89 13.54 13.54 3.35 7.50 5.28 6.08
MSCI ACWI IMI Index Dec 31 2023 11.14 21.58 21.58 5.46 11.49 7.77 9.09
Bloomberg U.S. Aggregate Bond Index Dec 31 2023 6.82 5.53 5.53 -3.31 1.10 1.81 1.63

Source: State Street Global Advisors, as of December 31, 2023.                                                       

Past performance is not a reliable indicator of future performance. Investment return and principal value will fluctuate, so you may have a gain or loss when shares are sold. Current performance may be higher or lower than that quoted. All results are historical and assume the reinvestment of dividends and capital gains. Visit for most recent month-end performance. Performance of an index is not illustrative of any particular investment. It is not possible to invest directly in an index.

Performance returns for periods of less than one year are not annualized. Performance is shown net of fees.

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 as applicable.

The market price used to calculate the Market Value return is the midpoint between the highest bid and the lowest offer on the exchange on which the shares of the Fund are listed for trading, as of the time that the Fund's NAV is calculated. If you trade your shares at another time, your return may differ.

Gross Expense Ratio: 0.35% Net Expense Ratio: 0.35%

The gross expense ratio is the fund’s total annual operating expenses ratio. It is gross of any fee waivers or expense reimbursements. It can be found in the fund’s most recent prospectus.

Portfolio Allocations

Assets Target Weight (%) Benchmark Weight (%) Ranges (%) Over/Underweight (%) Change Since Beginning of Quarter (%)
US Equity 38  25 0 - 50 13  4
International Equity 27.5 30 0 - 60 -2.5 -5
Investment-Grade Bonds 13.5 30.5 0 - 50 -17 -2.5
TIPS 6 6 0 - 20 0 0
High Yield 3.5 3.5 0 - 20 0 0
Commodities 3 2 0 - 20 1 0
Global Real Estate 0 3 0 - 20 -3 0
Cash 8.5 0 0 - 20 8.5 3.5
Total 100 100   0 0

Source: State Street Global Advisors Investment Solutions Group, as of December 31, 2023. Portfolio allocations are as of the date indicated, are subjected to change and should be relied upon as current thereafter. This information should not be considered a recommendation to invest in particular sector or to buy or sell any security shown. The benchmarks weights indicated reflect the weight of a custom benchmark. The "Custom Benchmark" is created by State Street Global Advisors and maybe different for different accounts.

Portfolio Positioning and Outlook

Our asset allocation outlook for early 2024 may not fit all that nicely into a bullish or bearish dichotomy. We’re bullish with respect to our equity allocations (where we are overweight), but there are some pockets of equity markets where we hold underweight positions. We also see a constructive outlook for fixed income, despite holding a net underweight allocation. Furthermore, our bullish outlook does not extend to the more growth-sensitive real asset space, however, we continue to see firm trends in gold.

Viewed through the lens of our Market Regime Indicator (MRI), risk appetite has remained positive, but has pushed up against levels that suggest a degree of complacency has entered into market psychology. While this doesn’t suggest that risk-off allocations are the right answer, more moderate risk budgeting generally is effective in this type of environment and we enter 2024 with a meaningful, but less aggressive, equity stance. From a quantitative perspective, our equity research continues to point to a reasonably healthy backdrop for equity markets broadly. Comparatively low debt loads, still strong operating results, and a handful of valuation metrics that showcase fair valuations all point to further equity strength.

The US equity market maintains the top spot in our research and is supported by a host of macroeconomic, sentiment, and quality drivers. Although the lack of dispersion does weigh on domestic shares, healthy profitability ratios, and relatively low debt levels remain foundations for a sizable US overweight as we move into 2024. Sentiment for emerging market equities has turned slightly negative, but positive price momentum, attractive valuations, and sturdy balance sheets anchor our constructive forecast and keep us overweight. European and Pacific equities remain underweight with benign price momentum and weaker macroeconomic factors weighing on our outlook. Valuations for European equities suggest they are undervalued, but poor sentiment indicators cloud the outlook. Expectations for both sales and earnings has improved for Pacific equities, but valuations are still unattractive.

Strong fundamental drivers in global bond markets and the relatively constrained risk premia available in equities would seem to make a good case for boosting bond allocations in early 2024. High interest rates, decelerating inflation, and some signs that central bankers will start to normalize short-term interest rates all provide a healthy backdrop for bond markets. But a mixed technical picture and the sharp decline in yields that has transpired since October create concern that markets may have moved too fast in embracing a more benign rates backdrop for early 2024. Shorter-term signals from our model continue to point to muted fixed income performance. Sluggish manufacturing PMI readings and momentum from the recent decline in rates imply lower rates, but higher nominal GDP relative to long-term Treasury yields suggests yields should rise. The net result is an expectation for rates to remain fairly stable. From a shape perspective, weak leading economic indicators and lower inflation expectations advocate for a steeper curve. Our expectations for high yield have firmed and we are overweight given positive seasonality and strong equity performance pointing to tighter spreads. Additionally, with government bond yields declining meaningfully, cost of capital for firms is lower which supports tighter spreads.

Despite resilient economic growth, some policy support in China and production restraint from OPEC+, commodities have failed to find solid footing as other risk assets move higher. From our assessment, we anticipate muted returns ahead for commodities. Our momentum indicator, which seeks to determine if the current environment is beneficial, remains positive, but to a lesser degree. Additionally, our evaluation of the curve structure for various commodities suggests future prices may fall and weighs on our outlook.

Although the slower growth environment is one that may create challenging conditions for commodity performance, we continue to see a strong setup for gold. The strong performance in December that saw gold push up toward $2,100 per ounce was enough to lift the last of our technical indicators to embrace the idea that gold is firmly in a positive trend — a very strong reading at present. Couple that with some reinforcing macro conditions, including a weaker US dollar and easing policy rates, and the rally in gold looks to be in good shape at the onset of 2024.

Market Regime Forecasts

The Market Regime Indicator (MRI) employs a quantitative framework and forward-looking market indicators, including equity- and currency-implied volatility, as well as credit spreads, to identify the current market risk environment. Tracking risk appetite shifts in the market cycle helps frame tactical asset allocation and volatility targets.

A Look at the MRI

A Look at the MRI

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