Satrix style tracker Q2 2021

What worked and what didn’t in Q2 2021?

| 4 August 2021

Factor performance review at a glance

Globally, Value detracted from performance, with investors falling out of favour with cheaper stocks. Quality (Profitability) was the best-performing factor for the quarter, while Momentum underperformed. Locally, Momentum was the best-performing factor, followed by Value from a long-short return point of view. Quality remained out of favour, followed by underperformance from Low Vol stocks.

Earnings revisions (56%) showed a strong positive return through the quarter as did Price Momentum (4.3%). Price to Book (2.3%) and Price to Cash Flow (5.5%) delivered well, with Dividend Yield (-6.6%) and Earnings Yield (-4.6%) detracting from Value. Growth (10.2%) showed positive returns, while Profitability (-8.1%) and Leverage (-4.8%) continued to lag.  Quality also underperformed in Q2. Stocks with Low Beta (-8.3%) and Low Volatility traits (-5.9%) also underperformed.

Q2 Quintile spread

Key events that impacted performance in Q2 2020

Stock markets across the globe posted positive returns for Q2 of 2021, continuing the equity rally from March 2020. Local equities were flat over Q2 as South Africa went back to Level 4 of lockdown amid the third wave of Covid-19 from the Delta variant. International markets experienced a positive quarter as vaccine rollouts accelerated in developed markets, and several highly vaccinated countries re-imposed stricter lockdown measures, indicating the virus’ impact may be felt for some time. For the quarter, the MSCI World Index (7.7%), MSCI Emerging Markets Index (5.1%) and MSCI USA Index (8.8%) all delivered positive returns in net USDs.

Locally, the SA rand strengthened against the US dollar in Q2, closing at R14.31 to the greenback, while ending the quarter at R19.75 to the pound and R16.96 to the euro. The SARB voted to keep its repo rate unchanged at 3.5% during its May meeting, confirming most analyst expectations. The Reserve Bank highlighted concerns of the economic impact of slow vaccine roll-outs and energy issues at Eskom. Forecast annual growth for South Africa was revised upward to 4.2% from the previous 3.8% (although this was before the third lockdown). The Reserve Bank forecast two possible interest rate hikes for the year.

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Satrix Managers (RF) (Pty) Ltd (Satrix) a registered and approved Manager in Collective Investment Schemes in Securities and an authorised financial services provider in terms of the FAIS. Collective investment schemes are generally medium- to long-term investments. Unit Trusts and ETFs the investor essentially owns a “proportionate share” (in proportion to the participatory interest held in the fund) of the underlying investments held by the fund. With Unit Trusts, the investor holds participatory units issued by the fund while in the case of an ETF, the participatory interest, while issued by the fund, comprises a listed security traded on the stock exchange. ETFs are index tracking funds, registered as a Collective Investment and can be traded by any stockbroker on the stock exchange or via Investment Plans and online trading platforms. ETFs may incur additional costs due to it being listed on the JSE. Past performance is not necessarily a guide to future performance and the value of investments / units may go up or down. A schedule of fees and charges, and maximum commissions are available on the Minimum Disclosure Document or upon request from the Manager. Collective investments are traded at ruling prices and can engage in borrowing and scrip lending. Should the respective portfolio engage in scrip lending, the utility percentage and related counterparties can be viewed on the ETF Minimum Disclosure Document. The Manager does not provide any guarantee either with respect to the capital or the return of a portfolio. The index, the applicable tracking error and the portfolio performance relative to the index can be viewed on the ETF Minimum Disclosure Document and/or on the Satrix website. Performance is based on NAV to NAV calculations of the portfolio. Individual performance may differ to that of the portfolio as a result of initial fees, actual investment date, dividend withholding tax and income reinvestment date. The reinvestment of income is calculated based on actual distributed amount and factors such as payment date and reinvestment date must be considered. If the fund holds assets in foreign countries it could be exposed to the following risks regarding potential constraints on liquidity and the repatriation of funds: macro-economic, political, foreign exchange, tax, settlement and potential limitations on the availability of market information.
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