SPDR® SSGA US Sector Rotation ETF – Q4 2020 Commentary
XLSR finished in positive territory for the fourth quarter of 2020 as the fund returned 10.94%, but underperformed the S&P 500 Index. The fund finished the quarter with overweight positions in Consumer Staples, Materials, Communication Services and Consumer Discretionary.
Performance Sector selection detracted from relative performance as negative contributions from Consumer Staples, Materials, Technology and Consumer Discretionary offset positive effects from Industrials, Energy and Communication Services. Consumer Staples appeared attractive across most factors evaluated and was held throughout the quarter. The sector finished higher, but trailed the S&P 500 and dented relative returns. Valuation and broad macro scores for Technology deteriorated in November, leading us to rotate out of the sector in December, which contributed to negative relative performance. Improving momentum and sentiment data led to a rotation into Communication Services in November, which proved beneficial. Vaccine-induced optimism and still-strong manufacturing PMIs benefited industrials as the ongoing reflation trade lifted the sector, which was a top performer and aided performance.