SPDR® SSGA Global Allocation ETF – Q4 2020 Commentary
During the fourth quarter of 2020, GAL finished up in absolute returns, but underperformed its custom strategic benchmark. The fund finished the quarter with an overweight to equities while favoring US credit bonds within fixed income.
Performance An increased allocation to equities in November was beneficial. While equity markets rose most vigorously in the wake of election results and vaccine news in early November, our addition to equities as risk appetite started to improve later in the month allowed us to take advantage of continued strong gains through the end of the year.
Elsewhere, positioning within fixed income aided performance. Our preference for credit assets at the expense of aggregate bonds helped as credit spreads continued to tighten – despite the looming expiration of certain Fed facilities. Underperformance was driven by positioning within equities and an allocation to gold. Allocations including underweights to US Small Cap and REITs hurt performance during Q4 amidst the vaccine-induced spike in value-oriented exposures and other reopening plays. Although we had moved to a net-neutral position in small cap early in October, outperformance from earlier in the quarter weighed on the Q4 results. REITs performed well along with other equities in Q4 and our large underweight had a negative impact, especially when compared to cross-asset alternatives like bonds/cash, which were flat to slightly up over the period. Gold encountered headwinds as rates started to rise on vaccine-induced optimism for economic recovery in 2021.