StashAway’s Q3 2024 Returns

Gaining steam through turbulence

During the third quarter of 2024, global markets experienced a notable rebound. This wasn’t without its moments of volatility, however, as the start of August saw a market correction tied to unwinding of the carry trade.

Ultimately, easing inflationary pressures, a favourable economic outlook, and the start of the US Federal Reserve’s rate cut cycle were supportive of equities and fixed income. Gold, meanwhile, soared amid continued geopolitical tensions. 

Put together, global equities have risen 19.1% for the year to end-September, global bonds have edged up 2.7%, ultra-short-dated Treasuries have delivered 4.1%, and gold has climbed 27.2%

In this environment, our portfolios’ positioning under our Economic Regime Asset Allocation (ERAA™) framework have enabled them to continue outperforming their benchmarks on average year-to-date.

Here’s how our portfolios performed in Q3 2024:

• General Investing and Goal-based Investing (These two portfolios share similar asset allocation)
• Thematic portfolios

A note on the rapid appreciation of the baht in Q3

During Q3, the Thai baht saw a rapid strengthening against the US dollar, amounting to about 12.3%. This was partly due to a sharp weakening in the USD as markets started to price in interest rate cuts from the US Federal Reserve amid softening economic data. 

This appreciation has weighed on local-currency returns during this period, as the ETFs that comprise our portfolios are denominated in USD. However, timing FX movements is notoriously difficult. Rather than attempting to predict short-term fluctuations, a more prudent approach is to invest with a long-term perspective. By dollar-cost averaging (DCA), you smooth out the impact of exchange rate volatility and can lower the average cost of your investments over time.

When discussing asset class performance, we’ll focus on USD terms – while still providing local currency figures – to enable a clearer understanding of how our portfolios performed before the impact of FX fluctuations.

General Investing and Goal-based Investing portfolios

StashAway’s General Investing (GI) portfolios continued to deliver positive absolute returns across StashAway Risk Indexes (SRIs), and outperform their same-risk benchmarks on average for the year to date.

Over the period, they were up +11.6% in USD terms (+5.2% on average in THB terms). That compares with an average +10.0% for their same-risk benchmarks.

Our portfolios’ lower volatility have aided their performance over a longer time period 

Our portfolios continued to experience lower volatility versus their same-risk benchmarks so far this year. On average, our GI portfolios faced annualised volatility of about 6.0% in USD terms for the year to end-September, versus 6.6% for their same-risk benchmarks.

This resulted in better volatility-adjusted returns versus their benchmarks – or a ratio of 2.5 year-to-date, compared with 1.8 for benchmarks. This ratio measures the return for each unit of risk taken.

Taking a longer view, that lower volatility in our portfolios has helped to protect against market drawdowns and support their performance over longer time horizons.

This was especially apparent over the past few years of elevated market volatility, as illustrated in the chart below. During this period, our portfolios have outperformed their benchmarks by about 6.7 percentage points on average.

Gold has provided a solid foundation for our portfolios’ performance

Our ERAA™ investment framework's overweight allocations to gold have been one of the key drivers of our portfolios’ performance in Q3 and throughout the year. A number of factors contributed to gold's strong gains – including safe-haven demand during episodes of market volatility, escalating geopolitical tensions, and the start of the Fed’s rate cut cycle. During the quarter, the precious metal posted returns of +13.1% in USD terms. For the year to end-September, it returned +28.5%.

As a reminder, we updated our benchmarks earlier this year to incorporate gold, as well as ultra-short-dated US Treasuries, with the goal of producing better risk-adjusted returns for our portfolios across economic cycles. (You can read more about that here: CIO Insights, How we put your money to work – the nuts and bolts of ERAA™, our investment framework.)

Looking ahead, we continue to see both cyclical and structural opportunities in gold. In the near-term, it could continue to benefit amid still-elevated geopolitical risks and from declining real interest rates as the Fed continues to cut.

Over the longer-term, we still believe concerns about higher US government bond issuance and efforts to diversify international reserves away from USD holdings should continue to underpin the asset class.

Equity markets regained steam, but have rotated away from tech 

Following a pair of sizable market corrections toward the end of the summer, the rally in global equities has continued to regain steam. However, recent months have seen the drivers of the rally rotate away from growth stocks and mega-cap technology firms and toward value stocks and smaller- and medium-sized companies.

ERAA™'s allocations to broad US and global equities helped our portfolios to ride this broad upswing, especially in our higher-risk portfolios. It also captured the rotation toward other parts of the market via exposure to value-tilted sectors like consumer staples, as well as to equal-weighted US equities.

Looking ahead, the latest signals from the data suggest that the US economy, while moderating, is still holding up. (Read more in CIO Insights: Why US recessions risks may be overstated.) What’s more, the start of the Fed’s rate cut cycle in a bid to support growth has further lowered the odds of a recession. Put together, our base case is that we’re likely to remain in an environment of inflationary growth – a regime that’s supportive of risk assets, and which should continue to benefit cyclical sectors like industrials, as well as mid- and small-cap stocks.

Safe-haven demand, rate cuts brought bond returns back in the black 

After spending much of the year in negative territory, fixed income returns finally turned positive in August as market volatility drove investors to safe-haven assets. Easing inflationary pressures and global central banks finally kicking off their easing cycles were also supportive for the asset class.

Accordingly, ERAA™'s allocations to longer-duration segments of fixed income – particularly the global aggregate, government, and emerging market bond sectors – have benefitted our lower-risk portfolios. That said, its exposure to ultra-short-duration US Treasury bills also supported returns amid still-elevated rates. (For more on bonds, see CIO Insights: Bond voyage! Our no-nonsense guide to fixed income.)

Thematic portfolios

Before accounting for currency impact, Our Thematic portfolios have shown solid performance so far this year, with our Technology Enablers portfolio seeing the strongest gains. Our Environment and Cleantech portfolio experienced a pickup in performance in Q3, while our Future of Consumer Tech and Healthcare Innovation portfolios posted more modest returns.

Technology Enablers

Our Technology Enablers portfolios posted returns of +13.8% in USD terms (+7.3% on average in THB terms) for the year to end-September.

While the semiconductor sector saw some pullback in Q3 due to the rotation away from mega-cap technology companies, it remained the main contributor to the portfolio’s performance for the year to date – with the our semiconductor ETF still up more than 40% during the period. Cloud computing and robotics sub-sectors were also positive contributors to performance.

Future of Consumer Tech

Our Future of Consumer Tech portfolios saw returns of +6.1% in USD terms (0% on average in THB terms) for the year to end-September.

The esports and gaming sub-sector continued to be a key driver of portfolio performance during the period, amid strong growth in the global video game industry. The fintech sub-sector was also a positive contributor, particularly in recent months. Those gains more than offset declines in other sub-sectors, including electric and autonomous vehicles.

Healthcare Innovation

Our Healthcare Innovation portfolios posted returns of +2.6% in USD terms (-3.3% on average in THB terms) for the year to end-September.

The pharmaceutical and global healthcare sub-sectors continued to post solid gains in Q3 and remained the main contributors to the portfolio for the year so far – though industry leaders like Eli Lilly and Novo Nordisk have seen more muted performance since mid-year. Our exposure to the healthtech and biotech industries were also supportive of performance, and has helped to offset the drag from parts of the genomics sub-sector.

Environment and Cleantech

Our Environment and Cleantech portfolios saw returns of +8.0% in USD terms (+1.7% on average in THB terms) for the year to end-September.

Our allocation to the smart-grid infrastructure sub-sector has continued to be a key driver of the portfolio returns, as has our exposure to water companies. The clean energy sector also saw a broad-based bounce in Q3 – which boosted returns for this portfolio during the period.

Disclaimers:

Our same-risk benchmarks are proxied by FTSE All-World Index for Growth (Prior to 31 July 2024 are proxied by MSCI All Country World Index and prior to 1 March 2023 are proxied by MSCI World Equity Index TRI) and FTSE World Government Bond TRI for Protective. After 24 April 2024, we added Bloomberg 1-3 Month US Treasury Bill Index for ST Treasuries and Bloomberg Gold Subindex Total Return Index for Gold to the benchmark.

Model portfolio returns are expressed in gross terms before fees, withholding taxes, and reclaims on dividends. They are provided only as a gauge of pure performance before other items.

Actual account returns may deviate from the model portfolios due to differences in the timing of trade execution (e.g. during the day vs close), timing differences and intraday volatility of reoptimisation and rebalancing, fees, dividend taxes and reclaims, etc.

Past performance is not a guarantee for future returns. Please study the product's features, return conditions, and relevant risks before making an investment decision; Overseas investments are subject to currency fluctuations.

This communication is not and does not constitute or form part of any offer, recommendation, invitation or solicitation to purchase any financial product or subscribe or enter any transaction.

This communication does not take into account your personal circumstances, e.g. investment objectives, financial situation or particular needs, and shall not constitute financial advice. You should consult your own independent financial, accounting, tax, legal or other competent professional advisors.