Our Returns in the First Half of 2023

10 August 2023

How to safely take a bull (market) by the horns

The first half (H1) of 2023, and Q2 in particular, saw a rally in global equity markets as Big Tech bounced back. Global bond markets meanwhile, posted more modest returns. Our investment framework, ERAA™, continued to signal a stagflationary regime – one of economic contraction and high inflation. Such an environment warranted caution – and due to our defensive asset allocations, our portfolios have outperformed in the lower risk indices and have seen lower drawdowns when faced with volatility in higher risk indices.

Digging into the current rally, it’s important to note that just a handful of large-cap tech stocks – Apple, Microsoft, and Nvidia come to mind here – have provided the bulk of broad-based equity returns. The most prominent drivers behind this are: i) investor excitement over AI, ii) the resilience of the US economy, and iii) a supportive liquidity environment as central banks like the Fed and ECB have combated banking crises with large liquidity injections.

Looking ahead, our analysis shows that the above supportive factors for US equities will likely start to fade – our 2023 H2 Market Outlook contains the details. Our portfolio positioning remains unchanged as ERAA™ continues to signal stagflation. In particular, as interest rates continue to rise, we remain overweight on short-dated US treasuries, which are providing a strong cushion.

With that in mind, let’s look at how our portfolios performed in H1:

  • General Investing and Goal-based Investing
  • Thematic portfolio
  • What we’re watching in the second half of 2023

General Investing - Gains across all risk levels

During H1, StashAway’s General Investing (GI) and Goal-based Investing portfolios  posted positive returns across StashAway Risk Indexes (SRIs). They were up between +2.7% and +11%, or +6.2% on average in USD terms.

Tech continued to drive equity market returns in H1

Equity returns were aided by the market rally stemming from tech. Our relatively defensive positioning resulted in underperformance versus same-risk benchmarks for our higher-risk SRIs, but they have benefited from the tech tailwinds. This has resulted in double-digit returns, all the while scoring better on volatility.

For our lower-risk SRIs, we outperformed our same-risk benchmarks in H1 due to our overweight positions on short-duration bonds (which saw higher yields as central banks continued to raise interest rates) and gold (which benefited from a flight to safety following the banking crises in March).

Our portfolios were also aided by Japanese equities’ positive performance amid their attractive valuations and brighter prospects for the economy. Pulling in the other direction, our allocations to the health care and energy sectors were slight detractors.

Gold was a safe-haven during the market turmoil in H1

Gold’s low correlation to other asset classes means it provides a safe-haven during times of uncertainty. We saw this dynamic play out in H1, with our allocations to gold benefitting from a flight to safety amid the banking crises in the US and Europe. In total, gold posted returns of  5.1% (in USD terms) during the period.

Short-duration bonds remained a key support for lower-risk portfolios

In fixed income, ERAA™’s overweight allocation to short-term US Treasury bills (T-bills) allowed us to take advantage of a high risk-free rate. As a result, this continued to be a stable source of returns – especially for our lower risk SRIs, which have higher exposure to bonds. Short-term yields rose further over the course of H1 as the Fed continued to raise interest rates – with T-bills yielding about 5.4% per annum at the end of the period.

As the Fed is poised to hike rates further – and likely keep them there – we continue to be overweight on the asset class. Our allocations to longer-duration US Treasuries and investment-grade bonds also supported our lower-risk SRIs.

Our defensive allocations minimised portfolio volatility and drawdowns 

In general, defensive assets like fixed income and gold shone during the periods of market volatility in H1. This underscores the importance of staying invested in a diversified portfolio. The relatively defensive nature of our asset allocations delivered an annualised volatility of 6.5% versus 7.9% for our benchmarks during H1. This lower volatility shielded against drawdowns, which supported performance over a longer period. Our lower-risk portfolios in particular widened their outperformance versus their benchmarks, visible in the chart below.

Moreover, lower volatility means higher risk-adjusted returns, which account for the amount of risk you take on to achieve returns. In H1, our GI portfolios posted an average Sharpe ratio of 2.0 versus 1.8 for their benchmarks (a higher ratio reflects better risk-adjusted performance).

Thematic portfolios - Tech rally momentum

The H1 rebound in equities, especially in tech, was the biggest driver of total returns for our thematic portfolios. Our tech-focused thematic portfolios – Technology Enablers and Future of Consumer Tech – both posted double digit returns, having rode the momentum. Meanwhile, our Healthcare Innovation portfolios posted modest gains, while our Environment and Cleantech portfolios saw slightly stronger returns. Our balancing assets (namely our allocations to bonds and gold) also provided some support for our returns in H1.

Technology Enablers

Our Technology Enablers portfolio posted gains of +19.5% on average in USD terms during H1. Market excitement in the tech sector during the past several months mainly revolved around the themes of AI and large language models (LLM). This has benefitted this portfolio in particular, due to its significant allocations to related industries such as semiconductors and cloud computing technology. Our balancing assets – namely, short-term bonds and gold – also contributed to returns, especially in the lower SRIs.

Future of Consumer Tech

Our Future of Consumer Tech portfolios posted gains of +17.5% on average in USD terms during H1. Similar to our Technology Enablers portfolio, our Future of Consumer Tech portfolio also enjoyed the spillover effects of AI and LLM from the broader tech rally. Furthermore, blockchain-related companies and the fintech sector supported portfolio performance as payments companies and digital banks saw a gradual recovery following the resolution of banking crises in March. As with our Technology Enablers portfolio, defensive allocations to bonds and gold also contributed to portfolio returns.

Healthcare Innovation

Our Healthcare Innovation portfolios posted gains of +3.7% on average in USD terms during H1. These portfolios had a relatively subdued performance in H1. The main drivers of its performance were software-related healthcare companies, which offset weakness from other sub-sectors, such as pharmaceuticals and biotechnology. As with our other Thematic portfolios, balancing assets also contributed to portfolio returns – particularly among the lower SRIs.

Environment and Cleantech

Our Environment and Cleantech portfolios posted gains of +6.8% on average in USD terms during H1. These portfolios performed relatively well in H1 with strong performance across sub-sectors like environment services, waste management, and energy infrastructure. Green bonds also generated positive returns for the portfolio. These factors offset poorer performance from the global clean energy and renewables sub-sector, which were due to supply chain disruptions and limitations in clean energy infrastructure.

What we’re watching as we head into H2

As we head into the second half of the year, we’re cautious but optimistic. With inflation still too high for comfort in many developed market economies – particularly in Europe and the US – those central banks are likely to keep interest rates higher for longer. Elsewhere, China is struggling with recessionary conditions but Japan may be a bright spot as it’s showing signs of rising out of long-term deflation.

As ERAA™ continues to signal a stagflationary economic regime, we’ve maintained our asset allocations – short-duration bonds, defensive equities, and gold continue to play key roles in weathering this macro cycle. For our full take on what’s coming in the next half of 2023, read our H2 Market Outlook.


Our same-risk benchmarks are proxied by MSCI All Country World Equity Index TRI for equities (prior to 1 March 2023 are proxied by MSCI World Equity Index TRI) and FTSE World Government Bond TRI for bonds. The benchmarks we use have the same 10-years realised volatility as our portfolios.

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 re-balancing, fees, dividend taxes and reclaims, etc. All returns are in USD terms.

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.

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.

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