Balanced ETF portfolios Q2 2019 commentary

Asset classes
Stocks, bonds, non-traditional
InstrumentsETFs
Investment styleMacro, diversified investment focus
Quarterly return (net of fees) 
Defensive+1.8%
Moderate+1.9%
Aggressive 
+2.1%

Market overview

Markets closed the second quarter (Q2) of 2019 with yet another rally in stocks and credit assets across the globe. This was the result of increasingly supportive tone of central banks in June, which indicates further monetary support is a very likely option of the economic situation across regions and leading economies continues to deteriorate. Major geopolitical tensions, such as the China-US trade negotiations, remain mainly unsolved. As a result, markets are now expecting rate cuts by the end of this year.

On the stock market side, European stock markets performed the strongest in Q2 and were closely followed by the US. Further economic stimulus indicated by the Federal Reserve and European Central Bank was a key contributor to this rally. Emerging market performance, however, was close to flat and was potentially influenced by the negative performance in most Asian stock markets. This, in turn, was driven by uncertainties linked to the Chinese economy.

Global bond markets also rallied as a result of comments made by the various central banks. European and US treasuries rallied and the 10 year US treasury yield has fallen back to 2% at the end of June. Similar is the performance of other fixed income assets including global investment grade credit as well as high yield.

 

Portfolio performance

Returns net of feesDefensiveModerateAggressive
April+0.8%+1.7%+2.2%
May
–1.2%–2.9%–3.8%
June+2.2%+3.2%+3.8%
1 Year  +3.4% +3.9% +4.8%
Since Inception (August 2015) +10.4%+22.0%+30.6%

(Performance is net of all fees) 

The Balanced portfolios ended the second quarter with solid positive returns which is in line with global market movements. Allocations across all asset classes have contributed positively to this result, where negative performance in May was made up by the rallies in April and June.

Performance was predominantly driven by our allocations to US and European stock markets. On the fixed income side, exposure to corporate bonds also contributed to this overall positive result.

Into Q3, the stock market exposure has been increased slightly compared to fixed income to reflect attractive valuations and positive market sentiment. 

Outlook

Within stocks, BlackRock maintains and overall positive view on the US, with increased exposure. The BlackRock view is to keep exposure via US minimum volatility stocks because (US minimum volatility) remains attractive whilst adding some resilience. This was delivered by reducing Pacific and Japan exposures. 

On the fixed income side, the strategies continue to prefer US credit and US high yield. In the case of EM debt, the signals has slightly improved. As a result, the overweight to US corporate bonds and US high yield bonds remain, and the underweight in Emerging Market debt is reduced. Within government bonds, the strategies maintain their strong underweight to longer dated US treasury bonds.

Any information found in this document, including performance information and statistics are subject to change. You can find the latest updated pricing information on the description page for each available portfolio. In providing this material Saxo Bank has not taken into account any particular recipient’s investment objectives, special investment goals, financial situation, and specific needs and demands and nothing herein is intended as a recommendation for any recipient to invest or divest in a particular manner and Saxo Bank assumes no liability for any recipient sustaining a loss from trading in accordance with a perceived recommendation. All investments entail a risk and may result in both profits and losses, and all capital is at risk. In particular investments in leveraged products, such as but not limited to foreign exchange, derivatives and commodities can be very speculative and profits and losses may fluctuate both violently and rapidly. Speculative trading is not suitable for all investors and all recipients should carefully consider their financial situation and consult financial advisors in order to understand the risks involved and ensure the suitability of their situation prior to making any investment, divestment or entering into any transaction. Any mentioning herein, if any, of any risk may not be, and should not be considered to be, neither a comprehensive disclosure of risks nor a comprehensive description of such risks. Any expression of opinion may not reflect the opinion of Saxo Bank and all expressions of opinion are subject to change without notice (neither prior nor subsequent).

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