June, 2023
The MSCI World Ex Australia Index gained 7.63% in unhedged AUD terms and 7.05% in fully hedged to AUD terms in Q2 2023.
Risk assets performed strongly over the second quarter of 2023. While sentiment was buoyed by a resolution to US debt ceiling negotiations and focus on generative AI, investors saw meaningful regional and sector dispersion across markets. Global equities, as measured by the MSCI World Ex Australia Index, increased by 7.6% over Q2 in Australian dollar terms, with Developed Markets outperforming their Emerging Market counterparts. Fixed Income markets, as represented by the Bloomberg Barclays Global Aggregate Index (hedged) declined 0.3% over the quarter, as sticky inflation and renewed expectations of higher-for-longer rates proved headwinds for government bonds.
In the US, the S&P 500 Index increased by 8.7% over the quarter and by 6.6% in June (in local currency terms). The Information Technology sector was the best performer with the rally highly concentrated among a handful of mega-cap tech companies, although June saw initial signs of equity gains broadening out across sectors. The US Federal Reserve (Fed) increased the Fed funds rate by 25 basis points over Q2 before pausing in June, but hawkishly signaled the likelihood of additional hikes later this year. Meanwhile, core inflation rose 5.3% year-on-year in May in line with consensus estimates and the labour market remains tight despite the unemployment rate edging up to 3.7%. US politicians also reached an agreement towards the end of May to suspend the country’s debt limit until 2025 and cap nondefense spending.
European equity markets, as represented through the Euro Stoxx 50 Index, increased by 3.7% in the second quarter and by 4.3% in June (in local currency terms). Corporate reporting season for Q1 saw European earnings beat analyst expectations but remain modestly lower compared to last year. The European Central Bank (ECB) hiked twice by 25 basis points over the quarter and raised its outlook for inflation – notably the central bank now forecasts inflation for the Eurozone to remain above its 2% target through 2025. Following the June rate decision, ECB President, Christine Lagarde, also struck a hawkish tone and implied that another increase in its policy rate in July was “very likely”. Meanwhile, core inflation ticked up to 5.4% in June, while the Eurozone’s largest economy, Germany, officially entered a technical recession.
In the UK, the FTSE 100 Index lost 0.3% over the quarter but gained 1.4% in June (in local currency terms). The Bank of England (BoE) surprised markets by re-accelerating the pace of interest rate increases – hiking rates by 50 basis points in June – to bring its policy rate to 5.00%. British core inflation increased over Q2, beating expectations to rise by 7.1% year-on year in May, which represents the highest level in over 30 years. There are still no clear signs that inflation has peaked in the UK. Alongside robust wage growth, investors are predicting that the BoE could hike rates multiple times by year end.
Asian equities were mixed over Q2. China’s CSI 300 Index declined by 4.0% over the quarter but rose by 2.1% in June (in local currency terms), with the country’s economic restart losing momentum. In contrast to their global counterparts, the People’s Bank of China (PBoC) lowered key lending rates in June amid increasing growth concerns, which also led to speculation of a potential fiscal stimulus response. China’s official manufacturing Purchasing Managers’ Index (PMI) data continues to show evidence of the weak economic rebound, with factory activity shrinking across the period, while business confidence also hit an eight-month low. Late in June, reports of potential new restrictions by US officials on semiconductor chip exports to China further weighed on sentiment.
Japanese equities, as represented by the Nikkei 225 Index, gained 18.5% over the quarter and rose by 7.6% in June (in local currency terms). The rally has seen Japanese stocks materially outperform their developed market peers over 2023, underpinned by a stronger economic outlook and optimism for corporate reform which has driven a pick-up in foreign investor inflows. The Bank of Japan (BoJ) kept policy unchanged over the quarter with its ultra-supportive stance sustaining inflation above the central bank’s target after decades of disinflation. A leading indicator of nationwide prices, Tokyo core inflation, rose to 3.2% year-on-year in June. Economists also expect the impact of higher wages may eventually put further upward pressure on inflation, with Japanese workers having negotiated large pay raises earlier this year.
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The MSCI World Ex Australia Index gained 1.2% in unhedged AUD terms and declined 0.2% in fully hedged to AUD terms in May 2023.
Most major asset classes declined in May as US debt ceiling negotiations dominated headlines. Global equities, as measured by the MSCI World Ex Australia Index (hedged), were down 0.2%, while the unhedged index finished the month up 1.2% as currency moves offset the decline in international share prices. Technology stocks were a positive outlier in May buoyed by upbeat sentiment around generative artificial intelligence, which prevented the broader equity index from falling further. Developed Markets outperformed their Emerging Market counterparts, with divergences observed across geographies and sectors. Fixed Income markets, as represented by the Bloomberg Barclays Global Aggregate Index (hedged), also closed the month down 0.5%.
In the US, the S&P 500 Index increased by 0.4% in May (in local currency terms), with the equity rally highly concentrated among a handful of mega-cap tech companies, notably Nvidia. Debt ceiling negotiations remained in focus throughout the month, with a deal agreed on the final weekend of May to suspend the country’s debt limit until 2025 and cap non-defense spending. The US economy also remains resilient, with the unemployment rate falling to 3.4% in April – reflecting a 50-year low. This has led to rising investor expectations of another interest rate hike by the US Federal Reserve (Fed), which increased its policy rate by 25 basis points over the month. Earlier in the month, First Republic Bank was acquired by J.P. Morgan and US regional banks remain under scrutiny.
European equities, as represented through the Euro Stoxx 50 Index, fell by 2.2% across the period (in local currency terms), with luxury goods producers reversing the previous month’s gains. Across the period, the Eurozone’s largest economy, Germany, officially entered a recession following a downward revision to Q1 economic data. Persistent higher prices have weighed on household spending and consumer confidence, with German headline inflation at 7.6% over April. Despite the growing economic damage, the European Central Bank (ECB) increased its benchmark interest rate by 25 basis points at the beginning of May.
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The MSCI World Ex Australia Index gained 3.16% in unhedged AUD terms and 1.64% in fully hedged to AUD terms in April 2023.
Financial markets were relatively calm over April despite the uncertain macroeconomic outlook. Global equities, as measured by the MSCI World Index, increased by 3.1% over the month in Australian dollar terms as investor sentiment held steady. Developed Markets outperformed their Emerging Market counterparts. Fixed Income markets, as represented by the Bloomberg Barclays Global Aggregate Index (hedged), remained relatively volatile but also closed the month in positive territory up 0.4%.
In the US, the S&P 500 Index increased by 1.6% in April (in local currency terms), with Communication Services and Real Estate sectors among the best performers. Core inflation data for March met expectations at 4.7% while the unemployment rate unexpectedly fell to 3.6%, reflecting ongoing tightness in the labour market. US regional banks have also come under renewed scrutiny after the troubles of First Republic Bank, which sold-off sharply after reporting a significant drop in deposits. The recent banking tumult has resulted in further tightening of credit conditions which is likely to drag on economic activity. Although corporate reporting season for Q1 has seen strong performance in terms of earnings surprises relative to analyst expectations, a year-on-year decline in corporate earnings is expected for a second straight quarter.
European equities, as represented through the Euro Stoxx 50 Index, increased by 1.6% across the period (in local currency terms), with luxury goods producers among the best performers. However, European economic activity remains challenged, with Q1 GDP growing a mere 0.1% from the previous quarter even as the energy shock faded. In April, European Central Bank (ECB) Executive Board Member, Isabel Schnabel, signaled more rate hikes ahead and noted concerns about strong underlying inflation and wages growth. Over the month, the German government also reached a pay deal with labor unions for 2.5 million public sector workers to receive a 5.5% pay rise.
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The MSCI World Ex Australia Index gained 9.20% in unhedged AUD terms and 7.14% in fully hedged to AUD terms in Q1 2023.
Major asset classes performed strongly over the first quarter of 2023, despite significant turmoil within the financial sector. Global equities, as measured by the MSCI World Ex Australia Index, increased by 9.2% over Q1 in Australian dollar terms. Developed Markets outperformed their Emerging Market counterparts, with fears of broader contagion across the banking system easing late in March. However, investors remain alert for signs of any further financial cracks and economic damage following the collapse of Silicon Valley Bank and forced acquisition of Credit Suisse by UBS. Fixed Income markets, as represented by the Bloomberg Barclays Global Aggregate Index (hedged) saw meaningful volatility but gained 2.4% over the quarter.
In the US, the S&P 500 Index increased by 7.5% over the quarter and by 3.7% in March (in local currency terms). The Information Technology sector outperformed while Financials recorded losses as US regional banks sold off after the collapse of Silicon Valley Bank. Despite the recent banking stress, the US Federal Reserve (Fed) increased the Fed funds rate by 50 basis points over Q1 but introduced a new liquidity backstop to help banks meet depositor withdrawals. Fed Chair, Jerome Powell, also cautioned that the Fed was not contemplating any rate cuts later this year, contrary to market expectations for a policy pivot following the latest banking tumult. Meanwhile, core inflation rose less than forecast at 4.6% year-on-year in February, while key housing market indicators have also shown signs of slowdown.
European equity markets, as represented through the Euro Stoxx 50 Index, increased by 14.2% in the first quarter and by 2.0% in March (in local currency terms). The takeover of Credit Suisse by UBS took the spotlight, with Swiss regulators swiftly facilitating the acquisition given sustained capital flight by the bank’s depositors. Meanwhile, the European Central Bank’s (ECB) hiked twice by 50 basis points over Q1. Following the March rate decision, ECB President, Christine Lagarde, struck a hawkish tone by re-stating the priority of reining in inflation – having seen core Eurozone inflation reach an all-time high of 5.7% over February.
In the UK, the FTSE 100 Index gained by 3.6% over the quarter but lost 2.5% in March (in local currency terms). The Bank of England pushed up its policy rate to 4.25%, having hiked rates twice over the period. UK inflation remains stubbornly high, with February CPI data increasing unexpectedly to 10.4% on the back of rising food prices and energy bills. Britain experienced widespread worker strikes over Q1, with unions across a range of industries protesting pay and working conditions, amidst a tight UK labour market.
Asian equities recorded positive returns in Q1. China’s CSI 300 Index rose by 4.7% over the quarter but declined by 0.5% in March (in local currency terms), with gains earlier in the quarter underpinned by the country’s economic reopening. In March, the country set its new GDP growth target of “around 5%” for 2023, representing its lowest for more than three decades and below last year’s goal of 5.5%. China’s domestic restart continues apace with February data showing strong activity and credit growth, while official non-manufacturing PMI hit a 12-year high late in the quarter.
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The MSCI World Ex Australia Index gained 2.09% in unhedged AUD terms and -1.63% in fully hedged to AUD terms in February 2023.
Following a strong start to the year, financial markets experienced more volatility in February as strong economic data drove a repricing higher in interest rates. Global equities, as measured by the MSCI World Index (hedged), declined by 1.6% over the month, while the unhedged index finished February up 2.1% as currency moves offset the decline in international share prices. Fixed Income markets, as represented by the Bloomberg Barclays Global Aggregate Index (hedged), recorded losses and closed the month down 1.8%.
In the US, the S&P 500 Index fell by 2.4% in February (in local currency terms), with Energy and Utilities sectors among the worst performers. Strong inflation prints again took centre stage over the month, as both headline and core inflation for January came in above expectations. In addition, the unemployment rate declined to a multi-decade low of 3.4% while US retail sales climbed to a two-year high. Signs that inflation is proving persistent and inconsistent with hopes for a quick return to the US Federal Reserve’s (Fed) target, along with strongerthan-expected economic data, saw the notion of any potential rate cuts in 2023 fade. The corporate reporting season for Q4 also showed evidence of weaker fundamentals, with less companies beating earnings forecasts and a smaller proportion of firms raising earnings guidance compared to the previous season.
European equities, as represented through the Euro Stoxx 50 Index, increased by 1.9% in February (in local currency terms). European assets have outperformed most major markets in recent months, despite core inflation increasing to 5.3% in January. Business activity continued to improve across the Eurozone with improvements in flash Purchasing Managers’ Index (PMI) readings. Over the month, the European Central Bank (ECB) hiked interest rates by 50 basis points to bring its policy rate to 2.50% and the Bundesbank President, Joachim Nagel, suggested the ECB may need to further tighten policy past its upcoming March meeting. Meanwhile, European corporate earnings disappointed with only four sectors recording positive earnings growth year-on-year.
In the UK, the FTSE 100 Index rose by 1.8% over February (in local currency terms). While UK inflation remains elevated, it dipped for the third month in a row to 10.1% in January which was below economist forecasts. Over the period, Prime Minister, Rishi Sunak struck a landmark deal with the European Union on post-Brexit trade rules for Northern Ireland to help resolve trade barriers and ease diplomatic tensions. Earlier in the month, the Bank of England (BOE) hiked rates by 50 basis points as expected but pushed back against future rate hikes.
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The MSCI World Ex Australia Index gained 3.95% in unhedged AUD terms and 7.17% in fully hedged to AUD terms in Q4 2022.
Major asset classes rose over the final quarter of 2022, although growing recession fears saw sentiment wane in December. Global equities, as measured by the MSCI World Index, increased by 3.9% over Q4 in Australian dollar terms, supported by the unwinding of China’s zero-COVID policy and softer inflation data. Emerging Markets outperformed their Developed Market counterparts. For the full year, global equities remain in negative territory at -12.5%. Fixed Income markets, as represented by the Bloomberg Barclays Global Aggregate Index (hedged) gained 0.6% over the quarter after suffering sharp losses earlier in the year.
In the US, the S&P 500 Index increased by 7.6% over the quarter but fell by 5.8% in December (in local currency terms), The initial rally in equities was underpinned by resilient corporate earnings and moderating inflation data, the latter of which bolstered investor hopes for a less aggressive monetary stance. The US Federal Reserve (Fed) slowed the pace of rate hikes by increasing the Fed funds rate by only 50bps in December (compared to 75bps in November). However, the Fed published a new set of interest rate projections which predicted the policy rate will rise to 5.1% by the end of 2023 – another significant revision upwards. A decline in goods prices saw two consecutive months of weaker CPI data, however services inflation remains stubbornly high. The US labour market remains tight, with average US hourly earnings rising by double the consensus forecast in November to reach a 5.1% annual rate.
European equity markets, as represented through the Euro Stoxx 50 Index, increased by 14.6% in the fourth quarter but declined by 4.3% in December (in local currency terms). Early signs that the European energy crisis may be abating and a possible peak in inflation helped stocks rally during the quarter. While Eurozone consumer prices rose by 10.1% in November, this was lower than markets had expected, given a noticeable drop in energy prices, and down from a record high in October. However, equities lost momentum after the European Central Bank’s (ECB) policy meeting in December, as investors baulked at the hawkish rhetoric by ECB President, Christine Lagarde, who signalled that future rate increases would be higher than expected and painted a bleak economic picture. The ECB also announced that quantitative tightening will begin in March 2023 to shrink the bond holdings on their balance sheet.
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The MSCI World Ex Australia Index gained 2.02% in unhedged AUD terms and 5.43% in fully hedged to AUD terms in November 2022.
The recovery in global equity and fixed income markets continued over November. Risk assets gained amid speculation that monetary tightening by global central banks has begun to moderate, while policy developments in China and softer inflation data across key economies supported investor sentiment. Global equities, as measured by the MSCI World
Index, increased by 2.0% over the month in Australian dollar terms, with Emerging Markets outperforming their Developed Market counterparts. Fixed Income markets also saw positive performance, with global bonds closing the month up 2.4% and Australian bonds rising by 1.5%.
In the US, the S&P 500 Index increased by 5.6% in November (in local currency terms), with Materials and Industrials sectors outperforming. US equities rallied when inflation data came in below consensus forecasts, with inflation rising 7.7% in October on an annual basis, compared to the 7.9% print predicted. Expectations that the US Federal Reserve (Fed) will moderate future rate increases on the back of softening inflation also helped markets trend higher.
However, various Fed speakers continued to emphasise that policy tightening still has further to go and the overall level of interest rates is more important than the pace of hikes. Meanwhile, the US midterm elections saw Republicans take control of the House of
Representatives, while the US unemployment rate also rose to 3.7% with the labour market seeing early signs of cooling.
European equity markets, as represented through the Euro Stoxx 50 Index, increased by 9.7% in November (in local currency terms), despite lackluster economic data and weak consumer sentiment.
The initial negative market reaction to a missile landing in Poland was quickly unwound when it became apparent this was an unintended accident by Ukraine’s air defense systems. Purchasing Managers’
Index (PMI) data showed that activity in the European services sector shrank in October – an indication of the growing economic damage from central bank tightening. This tradeoff was also acknowledged in previous European Central Bank (ECB) meeting minutes.
The UK equity market gained 7.1% in November (in local currency terms). As expected, the Bank of England (BoE) raised rates by 75bps, representing its biggest single hike since 1989. Investors also digested the UK government’s anticipated budget statement, which cut spending and raised taxes. This stabilizes the British budget on a new lower level of economic activity, however most of the austerity measures will come beyond the next scheduled election in early 2025.
Headline UK inflation hit a new four-decade high and pushed above 11% per annum on the back of higher energy and food prices.
Asian equities were also positive over the month. China’s CSI 300
Index rose by 9.8% in November (in local currency terms) after falling sharply in previous months. Market sentiment was buoyed by the incremental relaxation of China’s zero-COVID policy. The easing of pandemic controls came amidst widespread anti-lockdown protests across multiple Chinese cities following a recent flare up in COVID-19 cases and accompanying social restrictions. These demonstrations mark one of the largest acts of civil unrest in over a decade and led to a reassessment of pandemic controls to placate public demands.
Earlier in the month, Chinese authorities rolled out several measures to support the property market and ease the liquidity crunch faced by developers.
October, 2022
The MSCI World Ex Australia Index gained 7.81% in unhedged AUD terms and 7.22% in fully hedged to AUD terms in October 2022.
October saw a reprieve for risk assets, with the European energy crisis showing signs of easing and investors speculating there could soon be a potential dovish pivot by central banks. Global equities rallied over the month and the MSCI World Index rose by +7.8% in Australian dollar terms, with Developed Markets outperforming their Emerging Market counterparts. Fixed Income markets saw varied performance, with global bonds closing the month down -0.4% while Australian bonds posted positive returns of +0.9%. Riskier parts of the fixed income market also recorded positive performance given the improvement in risk appetite and tightening of credit spreads.
In the US, the S&P 500 Index increased by +8.1% in October (in local currency terms). US equities were boosted by a resilient corporate earnings season for Q3, with more than two-thirds of companies that have reported results delivering a positive earnings surprise. That said, the magnitude of positive earnings surprise is notably below the 5-year and 10-year average figure – signalling slowing demand across the economy. Energy and Industrials sectors outperformed over the period, while several large-cap tech names, including Meta and Amazon, disappointed. US GDP growth was stronger than expected and bounced back in Q3 to 2.6% annualized, driven largely by higher energy exports. Core PCE, the US Federal Reserve’s (Fed) preferred inflation measure, also accelerated slightly to 5.1% on annual basis over the month. Core inflation remains stubbornly high given strong wages growth and is not far from the 40-year high reached earlier this year.
European equity markets, as represented through the Euro Stoxx 50 Index, increased by +9.1% in October (in local currency terms). The European Central Bank (ECB) announced another 75bps rate hike in October, however ECB President, Christine Lagarde, took a dovish tone by signaling a slower pace of rate hikes ahead. European energy concerns also diminished over the period, with natural gas prices falling given Europe’s success in building up supply ahead of winter. Country inflation data across Germany, France and Italy, which was released late in the month, beat analyst estimates and remains at elevated levels.
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The MSCI World Ex Australia Index slightly gained 0.35% in unhedged AUD terms and declined 5.18% in fully hedged to AUD terms in Q3 2022.
The third quarter of the year proved grim for investors. Following a short-lived bear market rally in July, global equities resumed their sell-off in August and September, leaving the MSCI World Index roughly flat at +0.3% over the quarter in Australian dollar terms. The depreciation in the Australian dollar provided some offset to the fall in global share prices, with unhedged equities outperforming their hedged counterparts. Meanwhile, Developed Markets held up better than Emerging Markets amidst heightened volatility. Historically aggressive rate hikes by several central banks around the world saw Fixed Income markets, as represented by the Bloomberg Barclays Global Aggregate Index, close the third quarter down -3.8% for the Australian dollar hedged investor.
In the US, the S&P 500 Index declined by -4.9% over the quarter and by -9.2% in September (in local currency terms), with most sectors falling over the period. The US Federal Reserve (Fed) hiked interest rates twice by 75bps over the quarter and is on its fastest rate hiking cycle since the early 1980s. The Fed also published a new set of interest rate projections in September which predicted the Fed funds rate will rise to 4.6% by the end of 2023, a significant increase from prior views. While US inflation declined slightly for two consecutive months, the August inflation rate of 8.3% was above market consensus of 8.1% and remains elevated. The US labour market also remains tight as weekly jobless claims reached a five-month low in late September.
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The MSCI World Ex Australia Index dropped 2.54% in unhedged AUD terms and 3.57% in fully hedged to AUD terms in August 2022.
Financial market volatility was elevated in August amid hawkish central bank rhetoric. Global equities, as represented by the MSCI World Index, finished the month down 2.5% in Australian dollar terms, with Developed markets underperforming Emerging market counterparts. Fixed income markets, as represented by the Bloomberg Barclays Global Aggregate Index, were also challenged as bond yields rose, closing the month down at 2.7% for the Australian dollar hedged investor.
In the US, the S&P 500 Index fell by 4.1% in August (in local currency terms), with most major sectors declining over the month. While recent inflation prints appear to have peaked, the US Federal Reserve (Fed) re-confirmed its commitment to curb inflation, as evident from the Fed Governor’s hawkish message in Jackson Hole. Meanwhile, labour market conditions tightened further, with non-farm payrolls increasing more than market expectations in August. Economic indicators like retail sales and industrial production also remained resilient despite the economy recording two consecutive quarters of negative growth earlier this year.
European equity markets, as represented through the Euro Stoxx 50 Index decreased by 5.1% in August (in local currency terms) as the energy crisis deepened across the region. Within the European block, annual flash headline inflation hit an all-time high of 9.1% in August. Broadening price pressures have added to concerns that high inflation may become entrenched and push the European Central Bank (ECB) to hike rates further following their initial lift-off in July.
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The MSCI World Ex Australia Index gained 6.40% in unhedged AUD terms and 7.96% in fully hedged to AUD terms in July 2022.
Risk assets recovered some of their earlier losses in July as markets pared back expectations for monetary tightening amid a deteriorating growth outlook. Global equities, as represented by the MSCI World Index, finished the month up 6.4% in Australian dollar terms, with Developed markets outperforming Emerging market counterparts. Fixed income markets, as represented by the Bloomberg Barclays Global Aggregate Index, were offered some respite from prior months of rising rates, closing the month at +2.5% for the Australian dollar hedged investor.
In the US, the S&P 500 Index increased by 9.2% in July (in local currency terms), outperforming most major markets as positive Q2 corporate earnings surprises provided a boost to risk sentiment. Sectors like IT and Consumer Discretionary outperformed during the month.
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The MSCI World Ex Australia Index declined 3.17% in unhedged AUD terms and 7.44% in fully hedged to AUD terms in April 2022.
Tightening financial conditions saw equity and bond markets selling off concurrently in April, with multi-decade high inflation rates, hawkish central bank rhetoric and slowing global growth only serving to weigh on investor sentiment. Global equities finished the month in the red, declining by 8.0% in local currency terms, with Developed markets underperforming their Emerging market counterparts. Fixed income markets similarly sold off as yields climbed throughout the month amidst more hawkish expectations around the pace and magnitude of monetary policy tightening.
In the US, the S&P 500 Index detracted 8.7% over the month (in local currency terms), underperforming most other developed markets as growth sectors like Technology and Communications detracted sharply against the backdrop of rising interest rates.
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According to the Fed’s median dot plot, the policy rate is expected to rise further to 1.9% in 2022 and 2.8% in 2023 as the Fed battles with a tightening labour market and record inflationary readings. Supply chain disruptions from Russia’s invasion of Ukraine and the strict lockdowns in China have only served to exacerbate price pressures, with inflation accelerating to 8.5% in March, the highest reading since 1981. Meanwhile, concerns around growth have also begun to emerge, with real GDP falling by an annual rate of 1.4% in the first quarter amid a widening trade deficit and a fading of government stimulus spending. The saving grace was a resilient consumer, with tight labor markets underpinning consumer confidence. In April, the unemployment rate fell further to 3.6% and average hourly earnings grew by 0.4%.
European equity markets represented through the Euro Stoxx 600 Index detracted 1.6% over April (in local currency terms). Ongoing concerns around Europe’s heavy reliance on Russian oil and natural gas continued to raise risks of the economic deceleration, energy-driven inflation, and dampened consumer sentiment given the region’s exposure to the ongoing conflict within Ukraine.
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According to the Fed’s median dot plot, the policy rate is expected to rise further to 1.9% in 2022 and 2.8% in 2023 as the Fed battles with a tightening labour market and record inflationary readings. Supplychain disruptions from Russia’s invasion of Ukraine and the strict lockdowns in China have only served to exacerbate price pressures, with inflation accelerating to 8.5% in March, the highest reading since 1981. Meanwhile, concerns around growth have also begun to emerge, with real GDP falling by an annual rate of 1.4% in the first quarter amid a widening trade deficit and a fading of government stimulus spending. The saving grace was a resilient consumer, with tight labour markets underpinning consumer confidence. In April, the unemployment rate fell further to 3.6% and average hourly earnings grew by 0.4%.
European equity markets represented through the Euro Stoxx 600 Index detracted 1.6% over April (in local currency terms). Ongoing concerns around Europe’s heavy reliance on Russian oil and natural gas continued to raise risks of economic deceleration, energy-driven inflation and dampened consumer sentiment given the region’s exposure to the ongoing conflict within Ukraine
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The MSCI World Ex Australia Index declined 5.52% in unhedged AUD terms and 2.75% in fully hedged AUD terms in February 2022. In February, investors were jolted by Russia’s invasion of Ukraine. Markets, which were already tested by the pandemic, rising inflation, and a global wave of central bank tightening, were further injected with new uncertainty.
The United States and its European counterparts imposed a broad range of sanctions on Russia, the most severe of which banning transactions with the Russian central bank in an effort to restrict Russia from deploying foreign reserves. Further restrictions were placed on major Russian financial institutions with the US also removing Russia from the Swift International Payment System. Despite positive Q4 2021 earnings reports across developed economies, ongoing inflation concerns and central bank tightening remained a primary concern early in the month before investors grappled with rallying energy and materials prices after the commencement of Russia’s invasion.
The international stock selection strategy underperformed the benchmark over February. Sentiment, Cross Border Thematics, and Quality, particularly sustainability insights, are all detracted. Net overweight in North America and Europe, along with net underweight in Asia, were negative. North American Information Technology and Industrials saw the biggest detractions, with a similar picture in Europe, though at a smaller scale. Poor Sentiment also led to underperformance in the Health Care sector, though positioning in North America (overweight) and Europe (underweight) was contrary. An overweight in the Energy sector and underweight for Consumer Discretionary saw both of those sectors add modestly.
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The MSCI World Ex Australia Index declined 2.20% in unhedged AUD terms and 5.07% in fully hedged to AUD terms in January 2022. January was a rough month for financial markets. Volatility spiked on the back of ongoing inflation concerns and central bank tightening, along with increasing political tensions in Europe (especially Ukraine). Markets priced in hawkish pivots by various central banks around the globe, including the US Federal Reserve (Fed) and the Reserve Bank of Australia (RBA). The ensuing higher bond yields contributed to sharp rotations across sectors and styles such as a strong rotation into value stocks and out of growth stocks (especially smaller, less profitable companies). Investors were also grappling with rallying commodity prices and turbulent inflationary readings. Nonetheless, many investors attempt to look through the noise and volatility and focus on the more positive outlook, which points to healthy corporate earnings growth and growing economies as many countries recover from the effects of the Omicron wave.
Most global sharemarkets finished the month in the red (in local currency terms). Developed market equities and emerging market counterparts (to a lesser degree) declined as steeply valued stocks sold-off over the period. Developed market government bond indices also detracted, with strong upside pressure on bond yields as inflationary concerns triggered an end to the supportive rate environment.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/blackrock-advantage-international-equity-fund-fund-update-en-au-13.pdfDecember, 2021
The international stock selection strategy had a positive month in absolute terms and outperformed its benchmark. All insights added during the month, especially Sentiment. Geographically, all regions outperformed. Cross Border Thematics detracted in North America, however, this was more than offset by strong performance of Cross Border Thematics and Sentiment in Europe and Japan. Looking at sectors, HealthCare was amongst the top contributing sectors thanks to underweights healthcare equipment and supply in the US. Financials also added through underweight in European banks, especially in Spain while Materials benefitted from favourable positioning chemical names in Europe. Conversely, Consumer Staples detracted through unfavourable positioning within the food and beverages industry in the US. Positive contributors to performance included an overweight position in Apple and an underweight position in Paypal Holdings. Detractors from performance included an underweight position in Qualcomm and an overweight position in SAP.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/blackrock-advantage-international-equity-fund-fund-update-en-au-12.pdfNovember, 2021
The MSCI World Ex Australia Index gained 3.70% in unhedged AUD terms but declined 1.57% in fully hedged to AUD terms in November. Most global sharemarkets declined over the month (in local currency terms), but currency movements boosted unhedged international equity returns.
November was a volatile month for financial markets. Risk sentiment dropped with the emergence of the Omicron variant of COVID-19, which added significantly to investor uncertainty. Concerns around the rate of transmission of this new virus strain, the degree to which it evades prior immunity to other variants and whether it causes more (or less) severe disease than the Delta variant drove markets. Government responses to the new Omicron variant are unclear although some countries have already tightened mobility restrictions. November was also marked by the UN climate conference – COP26 – where global leaders discussed their climate commitments and assessed ways for coordinating efforts to combat climate change going forward.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/blackrock-advantage-international-equity-fund-fund-update-en-au-11.pdfOctober, 2021
The MSCI World Ex Australia Index gained 1.65% in unhedged AUD terms and 5.43% in fully hedged to AUD terms in October.
October was a mixed month for financial markets. Risk sentiment stayed positive as equities rebounded from their losses in September. Commodities had another strong month with energy prices continuing to rally, stoking inflationary pressures globally. Developed market government bond yields sold off over the month on the back of continued expectations around monetary stimulus being withdrawn. Some of the most significant rate moves occurred in Australia. 2-year Australian government bond yields spiked from close to zero to 0.6%, while 10-year yields rose from 1.5% to over 2.0% in October after the Reserve Bank of Australia (RBA) abandoned its yield curve control measures and did not intervene in defending its 0.1% target for the key April 2024 bond. High yield markets recorded mildly negative returns, while investment grade markets were roughly flat over the month.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/blackrock-advantage-international-equity-fund-fund-update-en-au-10.pdfSeptember, 2021
The MSCI World Ex Australia Index gained 3.99% in unhedged AUD terms and 0.57% in fully hedged to AUD terms over the third quarter of 2021.
US equities represented through the S&P 500 Index gained 0.6% over the quarter, despite September’s sell-off when the S&P 500 index declined 4.7%. Higher yields, concerns around slowing economic growth and developments in China all weighed on risk sentiment over the month. In terms of sectoral moves, technology stocks underperformed whereas banks benefited from higher yields, and energy prices drove sensitive sectors higher
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/blackrock-advantage-international-equity-fund-fund-update-en-au-2-2.pdfAugust, 2021
The MSCI World Ex Australia Index gained 4.03% in unhedged AUD terms and 1.77% in fully hedged to AUD terms in July.
The global economic recovery continued in July with steady progress in the COVID-19 vaccine rollout, a pick-up in mobility indicators (especially in Europe) and ongoing support from a monetary and fiscal policy perspective. However, it was a more volatile month for financial markets due to increasing concerns around rising cases of the more transmittable Delta variant and signs of a peak in economic growth, especially in the US.
Despite the volatility, developed market equities outperformed their emerging market counterparts in July. The positive performance was led by the United States (US) underpinned by a strong corporate earnings season and reassuring central bank comments. Within emerging market (EM) equities, China was a drag on markets as the government tightened regulation in a coordinated crackdown across sectors – adding to uncertainty and pulling share markets lower in the region. The Australian dollar depreciated against most currencies and in particular the US dollar.
US equities gained 2.4% over the month, on the back of a positive earnings season. Earnings delivery has been strong with a record number of companies beating both sales and earnings estimates powered by encouraging corporate guidance.
The European Central Bank (ECB) revised its forward guidance on interest rate policy, saying the bank will maintain its ultra-loose policy until it has sufficient evidence that inflation can sustainably hit its goal of 2%. The bank raised its inflation target from “below, but close to 2%” to “2%” as July saw the ECB publish the outcome of the ECB Strategy Review, the first since 2003. The inflation target was revised slightly higher to a ‘symmetric 2% inflation target over the medium term’. A reformulated and strengthened forward guidance on interest rates confirmed the ECB’s very accommodative policy stance. The final June Euro area headline inflation print increased 0.3% to 1.9% year on year with core inflation at 0.9% year on year.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/blackrock-advantage-international-equity-fund-fund-update-en-au-9.pdfJuly, 2021
The MSCI World Ex Australia Index gained 4.03% in unhedged AUD terms and 1.77% in fully hedged to AUD terms in July.
The global economic recovery continued in July with steady progress in the COVID-19 vaccine rollout, a pick-up in mobility indicators (especially in Europe) and ongoing support from a monetary and fiscal policy perspective. However, it was a more volatile month for financial markets due to increasing concerns around rising cases of the more transmittable Delta variant and signs of a peak in economic growth, especially in the US.
Despite the volatility, developed market equities outperformed their emerging market counterparts in July. The positive performance was led by the United States (US) underpinned by a strong corporate earnings season and reassuring central bank comments. Within emerging market (EM) equities, China was a drag on markets as the government tightened regulation in a coordinated crackdown across sectors – adding to uncertainty and pulling share markets lower in the region. The Australian dollar depreciated against most currencies and in particular the US dollar.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/blackrock-advantage-international-equity-fund-fund-update-en-au-8.pdfJune, 2021
The MSCI World Ex Australia Index gained 9.33% in unhedged AUD terms and 7.56% in fully hedged to AUD terms over the second quarter of 2021.
Most financial markets gained over the quarter, as reopening optimism and the accelerated vaccine rollout continued to drive positive performance across markets. This dynamic continues to be supported by ongoing government support from a monetary and fiscal perspective.
Within equities, developed economies had a particularly positive quarter. Governments in most developed markets have eased COVIDrelated mobility restrictions and activity levels have picked up alongside strong consumption growth, particularly in the US. However, upbeat market sentiment saw pockets of concern due to the spread of the highly transmissible Delta variant, inflation spikes and central bank narratives. The increased spread of the Delta variant has caused renewed virus flare-ups in parts of the world, along with new mobility restrictions in certain countries. Emerging economies continued to lag on the vaccination front, and EM equities underperformed their developed counterparts over the quarter.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/blackrock-advantage-international-equity-fund-fund-update-en-au-7.pdfMay, 2021
The MSCI World Ex Australia Index gained +1.2% in unhedged AUD terms and +1.0% in fully hedged to AUD terms in May 2021.
In the US, the S&P 500 Index gained 0.7% in May. News headlines were dominated by the higher than expected inflation data for April, and market reactions on the back of it. Inflation rose to 4.2% year on year, which is reasonably high from a historical perspective and caused concern amongst some investors. However, the Federal Reserve was largely unmoved and comments by members suggested that they see higher inflation as transitory – calming market nerves somewhat. Under the new policy framework, the US central bank is expected to have a higher tolerance to moderate inflation overshoots of the 2% target for a short period of time.
On the economic front, the US quarterly earnings season was much stronger than expected. The composite purchasing managers’ index (PMI) for May climbed to an all-time high as both manufacturing and service sectors expanded at record rates. Contributing to the uptick in the headline PMI figure was a significant expansion of production during May. The increase was widely attributed to stronger client demand and a further marked rise in new order inflows. On the other hand, the month of May witnessed some disappointing non-farm payroll data and the ISM manufacturing index also fell short of the elevated expectations. Nonetheless, the data is still consistent with a strong recovery in US manufacturing as well as the broader US economy.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/blackrock-advantage-international-equity-fund-fund-update-en-au-6.pdfApril, 2021
The MSCI World Ex Australia Index gained +6.33% in unhedged AUD terms and 6.15% in fully hedged to AUD terms over the first quarter of the year.
Financial markets experienced mixed performance in the first quarter of 2021. A broad risk-on rally buoyed equities, energy and high yield credit, given the accelerated economic restart that is underpinned by progress on the vaccine rollout, continued US fiscal stimulus support and accommodative monetary policy around the globe. More defensive assets such as Sovereign bonds and gold struggled amidst this more optimistic backdrop.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/blackrock-advantage-international-equity-fund-fund-update-en-au-5.pdfMarch, 2021
The MSCI World Ex Australia Index gained +6.33% in unhedged AUD terms and 6.15% in fully hedged to AUD terms over the first quarter of the year.
Financial markets experienced mixed performance in the first quarter of 2021. A broad risk-on rally buoyed equities, energy and high yield credit, given the accelerated economic restart that is underpinned by progress on the vaccine rollout, continued US fiscal stimulus support and accommodative monetary policy around the globe. More defensive assets such as Sovereign bonds and gold struggled amidst this more optimistic backdrop
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/blackrock-advantage-international-equity-fund-fund-update-en-au-4.pdfFebruary, 2021
The international stock selection strategy gained and slightly outperformed its benchmark this month. Amongst insights, Relative Valuation and Cross Border Thematics added while Momentum detracted. Geographically, the main source of outperformance came from Relative Valuation in Japan. Asia also contributed (Momentum) while Europe and US detracted. Looking at sectors, Consumer Discretionary was the top contributing sector thanks to overweights specialty retailers in Japan and the US.
Overweight interactive media & services in the US added to the Communications Services sector while overweights in banks across Europe, Canada and the US helped Financials. US software and semiconductors overweights weighed on Information Technology, the worst performing sector this month. Positive contributors to performance included overweight positions in Twitter and Phillips 66.
Twitter – The American social media company Twitter announced new revenue targets and the potential launch of a subscription feature which was well received by the market. Management stated that it expects to significantly increase its daily active users and double its annual revenue by the end of 2023. The overweight position was a result of favourable across all insights, especially Momentum and Cross Border Thematics.
Phillips 66 – The US multinational energy company saw its share price gain over +22% in February supported by the increase in the price of oil. The overweight position was driven by positive Quality, Sentiment and Cross Border Thematics insights. Detractors from performance included overweight positions in Equinix and Beiersdorf.
Equinix – The American data centre REIT Equinix surprised the market with better than expected earnings for the fourth quarter however investors were concerned about the increasingly competitive environment and potential impact on pricing in the industry. The overweight position was a result of generally positive views across most insights.
Beiersdorf – The German care products manufacturer Beiersdorf reported a decline in sales of over 8% due to the pandemic in 2020. Despite management expecting sales recovery for 2021, the share price dropped and fell out of the DAX index. The overweight position was driven by generally positive insights, especially Momentum and Sentiment.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/blackrock-scientific-australian-equity-fund-fund-update-en-au-2.pdfJanuary, 2021
The international stock selection strategy outperformed its benchmark this month. Momentum and Relative Valuation added while Cross Border Thematics, Quality and Sentiment insights detracted. Geographically, the main source of outperformance came from Europe where all insights added.
Japan contributed (Sentiment and Momentum) and so did the US where weak Sentiment insights were offset by positive Momentum and Relative Valuation. Sector wise, Industrials was the top contributing sector thanks to underweights in the US and overweights in Europe. Overweights chemicals in Europe added to the Materials sector while overweights in North America generally helped the Healthcare sector. Textiles, apparel & luxury goods overweights in the US and Germany hurt Customer Discretionary, the worst performing sector this month. Positive contributors to performance included overweight positions in Nokia and Teladoc Health.
Nokia
The Finnish multinational communication company Nokia share price soared on no specific company news forcing the company to issue a statement to the exchange noting that it was unaware of any material news that had not been publicly disclosed. The overweight position was a result of favourable Relative Valuation and Cross Border Thematics insights.
Teladoc Health
The US virtual healthcare company saw its share price gain supported by positive views after presenting at a key healthcare conference. The overweight position was driven by positive Quality, Sentiment and Cross Border Thematics insights. Detractors from performance included overweight positions in Lilly Eli & Co and Coco Cola.
Lilly Eli & Co
The American drugmaker Lilly Eli & Co surprised investors with better than expected earnings for the fourth quarter thanks to strong sales of its top selling diabetes drugs. The underweight position was a result of generally negative views across most insights.
Coco Cola
The American beverage company Coca Cola saw its share price fall as investors started to worry that the effect of Covid could last longer than initially anticipated. The overweight position was driven by generally positive insights, especially Sentiment, CrossBorder Thematics and Relative Valuation insights.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/blackrock-advantage-international-equity-fund-fund-update-en-au-3.pdfDecember, 2020
The international stock selection strategy had a strong quarter in absolute terms; however, it slightly underperformed its strongly performing benchmark. Quality and Momentum detracted the most while Cross Border Thematics, Relative Valuation and Sentiment insights were relatively flat. Geographically, while Europe added, most regions detracted, especially the US with poor performance of Momentum insights. Information Technology (overweights in IT services and software) in the US was the main source of underperformance. Financials also detracted through underweights in Europe despite the strong gains in US banks (overweights). Underweights aerospace in Europe and US weighed on Industrials while underweights metal and mining in the UK were on a drag on Materials. On the positive, Communications Services added in the US and in Europe, as did Energy. Consumer Discretionary (overweights in specialty retailers) did well in Japan and also in the US. Positive contributors to performance included overweight positions in Wells Fargo and Citigroup.
Wells Fargo – The American financial services company, like its industry peers, saw its share price rally as investors rushed towards value and cyclical names on potential effective vaccine news. The overweight position was a result of favourable Momentum, Sentiment and Cross Border Thematics insights.
Citigroup – The US financial institution gained, in line with the broader Financials sector, which performed strongly on improved sentiment on the economic outlook after the announcement of the Pfizer vaccine. The overweight position was driven by positive Momentum, Sentiment and Cross Border Thematics insights. Detractors from performance included overweight positions in SalesForce.com and Equinix.
SalesForce.com – The US cloud-based software company reported results that beat market expectations; however the share price fell after management confirmed a major acquisition and anticipate slower growth for next year. The overweight position was a result of generally positive insights especially Cross Border Thematics and Momentum insights.
Equinix – The American internet and data centres multinational’s share price suffered during the market rotation in November. Information Technology stocks were heavily sold off after the announcement of the vaccine as investors turned towards value names. The overweight position was driven by generally positive insights, especially Sentiment, Cross-Border Thematics and Momentum insights.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/blackrock-advantage-international-equity-fund-fund-update-en-au-2-1.pdfNovember, 2020
The MSCI World Ex Australia Index gained 7.43% in unhedged AUD terms and 11.56% in fully hedged to AUD terms in November. Global sharemarkets recorded very strong performance in November 2020, with many indices reaching new all-time highs. Lower uncertainty following the US election and announcements by three different drug makers around a breakthrough for an effective COVID-19 vaccine stoked investor optimism. On November 9th, Pfizer announced that its clinical trial has returned preliminary results suggesting that its vaccine is over 90% effective in preventing COVID-19, which was well above expectations.
A few days later, Moderna (another drug maker) also reported strong trial results. This was followed by news of a third potential COVID-19 vaccine candidate developed by the company AstraZeneca in partnership with the University of Oxford. All three vaccine announcements were positively received by financial markets, while the Oxford/Astra Zeneca vaccine may be the most impactful as this vaccine is easier to distribute and can be sold at cost. Hopes that mass immunization could bring an end to the global pandemic and speed up the economic recovery propelled sharemarkets higher through November.
Although broad market indices enjoyed stellar performance over the month, there was a lot happening under the surface. The positive vaccine news triggered sharp rotations and major swings in financial markets. Cyclical sectors and industries that had previously suffered relatively weaker performance outperformed significantly in November, while technology stocks underperformed. There were also major rotations in style factors. For example, Value shares (i.e. companies that appear to be trading at inexpensive levels) rallied in November following several months of underperformance. Small-cap stocks also rallied strongly. On the other hand, Momentum stocks (i.e. those that have been trending higher) underperformed significantly, with Momentum experiencing one of the sharpest and deepest drawdowns in history between 9th to 11th November.
In the US, the S&P 500 index gained almost 11% in November reaching new all-time highs along the way. The US presidential election took place in early November, which led to an initial relief rally. A divided government (with Democrats winning the majority in the House of Representatives but Republicans likely to retain majority in the Senate) calmed market fears that a Democratic sweep could bring major tax changes in the US. Market attention quickly moved to the positive vaccine news, which drove financial markets higher and triggered a wave of optimism that a medical solution will address the current health crisis around the world. Yet, the number of COVID-19 cases and hospitalisations in the US continued to climb in November and several US cities, including Chicago and New York, introduced tighter restrictions to mitigate the spread of the virus. Investors focused on the encouraging vaccine news instead and sentiment remained positive throughout the month.
Some US corporations released their quarterly earnings in November, which was another event that largely flew under the radar. The technology, health care and communications sectors reported earnings above those seen a year ago before the pandemic – reflecting the ability for some companies to successfully navigate, or even thrive in, this difficult environment. Corporate earnings in the industrial, energy and financial services sectors remained well below levels seen before the pandemic. European equity markets enjoyed very strong performance over the month, with several indices recording their largest monthly gain ever. The German DAX Index gained 15%, while the French CAC40 Index and UK FTSE 100 Index gained approximately 20% and 13%, respectively. Similar to the US, COVID-19 cases remained high in Europe and the renewed ‘lockdown’ restrictions were starting to have an effect on economic indicators. For example, restaurant bookings collapsed reflecting the closure of pubs and restaurants in certain regions. Electricity demand and mobility indicators also declined significantly. Yet, investors were clearly looking through these near-term challenges and were quick to price in a broader economic recovery which is expected to take place in 2021.
Asian equity markets also enjoyed very strong performance in November. Positive investor sentiment and increased risk appetite helped drive sharemarkets higher in the region. A strong Chinese economy and a weaker US dollar also helped.
Macro data confirmed that China’s economy is operating at levels seen before the pandemic and the country is further ahead in the recovery process compared to its Western counterparts. Strong demand for China’s exports and healthy domestic spending has been driving the Chinese economy – leading to growth rates well above those seen in other countries. China is the only major economy that is expected to record positive annual economic growth in 2020, according to the latest forecasts by the International Monetary Fund (IMF).
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/blackrock-advantage-international-equity-fund-fund-update-en-au-1.pdfOctober, 2020
The international stock selection strategy was flat for the month. Positive performance from Quality and Sentiment insight groups were offset by Momentum, Cross Border Thematics and Relative Valuation insights. In a similar vein, good performance in Europe and small positive in Asia, was offset by poor performance in the US. Financials (overweights in banks and insurers) and Information Technology (overweights in IT services) in the US were the main source of underperformance, with gains from US Industrials. The strategy also did well through overweights in Communication Services across all regions, with overweights in European and US Consumer Staples adding, as did Health care and Information Technology in Europe.
Positive contributors to performance included overweight positions in Skechers and Colgate-Palmolive.
-Skechers – The US lifestyle and footwear company posted better than expected Q3 earnings, with a strong bounce back after a tough Q2, driven by improved sales across several regions. The overweight position was a result of favourable Momentum, Quality and Valuation insights.
- Colgate-Palmolive – The household name reported double-digit increased in operating profit, net income and earnings per share, beating expectations with management increasingly confident, to the point of providing annual guidance. The overweight position was driven by favourable Sentiment, and Valuation insights. Detractors from performance included overweight positions in Mastercard and East Japan Railway.
- Mastercard – Global payments firm Mastercard reported declining revenue over Q3 as the impact of the pandemic lingered, especially with lower cross-border (international travel related) volumes. The overweight position was driven by positive Quality, Cross-Border Thematics and Sentiment insights.
-East Japan Railway – The railway operator has continued to face headwinds after posting its first operating and net losses since 1987, with revenues for the last 6 months -48.2% lower. The modest overweight position was a result of positive Sentiment and Valuation insights.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/blackrock-advantage-international-equity-fund-fund-update-en-au.pdfAugust, 2020
The international stock selection strategy had a very positive month in both absolute terms and relative to its benchmark. Sentiment and Momentum signals that did well, along with Cross-Border Thematics, whilst Fundamentals were not rewarded, as both Valuation and Quality insights detracted, Most of the performance came from Momentum and Cross Border Thematics in the US even though these insights were generally weak in Europe. Looking at sectors, overweights Information Technology and Consumer Discretionary in North America contributed positively to performance. Healthcare in Europe and North America also did well. Conversely, Consumer Staples in Europe was generally weak due to overweights in beverages names.
Overall
Consumer Discretionary, Information Technology, Healthcare and Materials contributed while Financials and Industrials detracted the most. Positive contributors to performance included overweight positions in Salesforce and Gap. Salesforce – American customer software firm Salesforce reported its latest quarterly results well above market expectations and provided strong forward guidance as more businesses continue to reach out to their clients through digital means. The overweight position was due to favourable views across most insight groups, especially Cross Border Thematics, Quality and Sentiment. Gap – American apparel giant Gap’s share price rallied after investors realised the strong growth potential for the company’s athletic brand, Athleta, recently valued at over $3billion. The overweight position was driven by favourable Momentum and Quality insights. Detractors from performance included overweight positions in American Tower Corp and Diageo. American Tower Corp – American Communication Services Reits missed market expectations with its latest results, blaming a decline in revenues in its property segment in Asia and Latin America. The overweight position resulted from positive views on Sentiment, Cross Border Thematics, and Momentum. Diageo – British beer and spirits producer Diageo has been struggling with the closure of bars, restaurants and clubs during the pandemic. Despite an increase in at home consumption, volumes are likely to remain low for the rest of the year. The overweight position was a result of favourable Sentiment, Cross Border Thematics, and Momentum insights.
ticker: BGL0109AU
commentary_block: Array
factsheet_url:
release_schedule: Monthly
fund_features:
BlackRock Advantage Hedged International Equity Fund offers investors exceptionally managed systematic equities backed by a strong research agenda and a low fee to boot, warranting our increased conviction. The Fund aims to outperform the MSCI World ex Australia Index (unhedged/hedged in Australian dollars with net dividends reinvested) before fees over rolling three-year periods, while maintaining a similar level of risk as its benchmark.
- Value stock strategy.
- Focus on fundamental, economic, and technical conditions.
- Exposure to international shares.
- Typically for long term investment horizon.
manager_contact_details: Array
asset_class: Foreign Equity
asset_category: Currency Hedged
peer_benchmark: Foreign Equity - Currency Hedged Index
broad_market_index: Developed -World Index
structure: Managed Fund