After a strong rally in 2023, equities continued their momentum into the first quarter of 2024. In particular, the S&P 500 hit new historical highs and posted a +10.2% gain for the quarter. This marked its best first-quarter performance in five years. On the other hand, the bond markets faced challenges in Q1, primarily due to revised expectations regarding the Fed’s policy adjustments. The anticipation of fewer rate cuts this year — from five times at the start of the year to two times now — has prompted a rise in the US 10-year Treasury Yield to 4.3% in March 2024 from 3.9% at the beginning of the year.
With such a macro backdrop, let’s delve into an in-depth analysis of Syfe’s portfolios in Q1 2024.
Key performance highlights for Syfe Portfolios in Q1 2024:
- Following a strong rally in 2023, our Core Portfolios started the year on a positive note. Equity100, Growth, Balanced and Defensive gained +8.9%, +6.8%, +4.5% and +3.5% respectively in Q1 2024.
- REIT+ portfolios pulled back due to rising yields, but continue to outperform its benchmark.
- Despite rising Treasury yields, both Income+ portfolios delivered positive returns. The Income+ Preserve and Income+ Enhance portfolios returned +0.9% and +2.2% respectively in Q1 2024, outperformed the benchmark by +1.3% and +2.6%.
- For Thematic portfolios, Disruptive Technology continued to lead in Q1, driven by continuing enthusiasm for artificial intelligence(AI). Disruptive Technology thematic portfolio was up +10.4% in Q1 2024, following a strong return of +43.8% in 2023.
- As banks are moving to reduce interest rates on savings accounts, Cash+ Flexi and Cash+ Guaranteed offer a robust alternative. Both cash management solutions provide higher returns than saving accounts, with no hidden conditions.
Syfe Core Portfolios: Started 2024 on a Strong Note
Performance Spotlight: Core portfolios kicked off the new year on a high note. Equity100, Growth, Balanced and Defensive gained +8.9%, +6.8%, +4.5% and +3.5% respectively in Q1 2024.
The equity portion of the portfolios delivered strong returns, with technology and growth sectors continuing to lead the rally. Meanwhile, we observed a broadening of the market rally, with RSP (Invesco S&P 500 Equal Weight ETF) also making a positive contribution to the portfolios. On the other hand, allocations in the defensive sectors and exposure to emerging markets, including China, detracted from performance.
On the bonds front, allocation to long-term US Treasuries detracted from performance, as interest rates rose due to strong economic data and a repricing due to more gradual expected rate cuts from the Fed. The portfolios’ diversification into gold through GLD (SPDR Gold Shares) contributed positively to performance
Looking ahead: We’re gearing up for a major portfolio refresh this month. This is not just a routine adjustment; we are planning a comprehensive overhaul. Stay tuned for significant updates that aim to enhance the strategy and performance.
Syfe REIT+ : Faced Headwinds Amid Rising Yields
Performance Spotlight: As a traditionally rate-sensitive sector, S-REITs were negatively impacted by higher interest rates in the first quarter. The S-REITs sector, gauged by the iEdge S-REIT Leaders Index, pulled back by -7.5%. Our REIT+ portfolios, which are built to track the index, were also negatively affected. The REIT+ (100% REITs) and REITs with Risk Management portfolios were down -7.3% and -5.1% in Q1 respectively. However, both portfolios still managed to outperform the benchmark.
Looking ahead: After the price retracement in Q1, the price-to-book ratio of S-REITs has returned to 0.87X, a 16% discount compared to the long-term average. Meanwhile, the REIT+ (100% REITs) portfolio offers an attractive dividend yield of 6.3% p.a. This presents an appealing opportunity for investors seeking to build income. To better manage market volatility, investors may consider adopting the dollar-cost averaging (DCA) approach to navigate these uncertain times more smoothly.
Syfe Income+: Showcased the Value Added Through Active Management
Performance Spotlight: Despite challenging market conditions for bonds, both Income+ portfolios delivered positive returns. The Income+ Preserve and Income+ Enhance portfolios posted returns of +0.9% and +2.2% respectively in Q1 2024, while the reference benchmark was in negative territory.
By the end of Q1 2024, the Income+ portfolios had reached their first anniversary since launch. Over the last year, Income+ Preserve and Income+ Enhance returned 4.8% and 5.6% respectively, outperforming the benchmark by 2.4% and 3.2%. This outperformance highlights the value added through active management.
Income+ Payout Yield: One of the primary investment objectives of the Syfe Income+ portfolios is to provide sustainable and diversified income sources. Since its inception, Income+ Preserve and Income+ Enhance have achieved an average annualised payout ratio of 4.2% p.a. and 5.5% p.a. respectively, within the target range of 4% p.a. to 6% p.a.
Looking ahead: The market has repriced the number of rate cuts from five at the start of the year to two now. This could mean less room for negative surprises moving forward. Currently, the bond market presents compelling opportunities, with starting yields near 15-year highs. Both Income+ Preserve and Income+ Enhance are well-positioned to capitalise on these opportunities due to their flexible and diversified strategies.
Thematic Portfolios: Disruptive Technology Continued to Lead
Driven by continuing enthusiasm for artificial intelligence(AI), it’s not surprising that Disruptive Technology continued to deliver strong gains in Q1. This thematic portfolio was up +10.4% in Q1 2024, following a strong return of 43.8% in 2023. While there are some concerns about whether the stocks are in bubble territory, we believe that the valuation is rich but not in a bubble yet.
The thematic portfolio, Healthcare Innovation, gained +6.5% in Q1 2024. Key trends influencing the sector included the adoption of AI, weight-loss drugs, and advancements in patient care.
Other themes, such as ESG & Clean Energy and China Growth, delivered tepid returns for Q1. Although economies remained soft, China’s new economy sectors may offer pockets of opportunities.
Syfe Cash+ : Offer Attractive Returns with no hidden conditions
In the first quarter, Cash+ Flexi achieved an annualised actual net realised return of 3.7%. The current projected return stands at 3.8% p.a. as of 31 March 2024.
Cash+ Guaranteed offered a guaranteed return of 3.5% p.a. to 3.8% p.a. as of 12 April 2024. You can choose the term （3months, 6 months or 12 months) that matches your liquidity needs.
A few banks in Singapore have announced plans to cut interest rates on savings accounts. Cash+ Flexi and Cash+ Guaranteed offer a robust alternative. Both cash management solutions provide higher returns than saving accounts, with no hidden conditions, such as minimum capital requirements, minimum spending, or salary credit.
Our Thoughts For Q2 2024
As we enter Q2 2024, the rally in US equities could broaden beyond the technology sector to encompass other industries. To mitigate concentration risk and capitalise on this expanding equity rally, we prefer equal-weighted equity ETFs over market-cap-weighted ETFs
Regarding interest rates, expectations for the first rate cut are now likely to be postponed until Q4. However, the bar for the Fed to raise rates again remains high. Unless there is an unexpected resurgence in inflation, the policy rate trajectory will likely continue to favour loosening. You can leverage the current market conditions to build income through higher-yielding assets like bonds and S-REITs.
Read More:
Syfe Portfolio Performance Review Q4 2023: Rode Market Rally
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