Pago Pago, AMERICAN SAMOA — As of December 31, 2022 the American Samoa Government Employees Retirement Fund (ASGERF) noted three consecutive quarters of negative returns for both stocks and bonds, before capital markets rebounded on signs of reduced inflationary pressures and a tempered pace of federal rate hikes.

This is outlined in a report submitted during the Retirement fund meeting held in Las Vegas last week and obtained by Samoa News.

The report was prepared by Sageview Capital, an American investment firm.

“Revising a trend of US dollar strength, the US declined about eight percent against a basket of major foreign currencies during the quarter.

“Over the quarter ending December 31, 2022 major capital markets advanced materially but not enough to overcome negative results over the full calendar year.”

The report states that the ASGERF portfolio gained 8.7 percent during the 4th quarter outpacing the policy index which gained 7 percent.

“As of December 31, 2023 the total funds stand at $164,476,653 million.”

(According to the report, in 2021 the fund net position at the end of the year was $195.49 million, from $181.18 million at the beginning of the year. Read elsewhere in today’s issue of ASGERF losses.)

The investment firm further noted the risks as geopolitical tensions that have significantly increased in both Europe and Asia; the Federal Reserves continues to raise rates in a declining and fragile US economy; a deep and or prolonged US recession is not discounted in equity market valuations.

“Also the higher interest rates do not resolve supply-chain disruption; inflation may persist longer than expected.

“The shortage of workers remains among the largest sources of supply-chain disruption and corporate margins are under pressure.”

The opportunities cited by Sageview Capital are that China has relaxed their lockdown policies, which should lead to a major economic rebound in China.

“Non-US equities are at historically attractive valuations relative to the US, especially emerging markets; bonds have become attractively valued with yields at the high end of their 20-year range; the growth equities could rebound strongly in anticipation of a moderation in Fed policy and the potential for lower interest rates and active management is always an opportunity.”

According to the report, although 2022 was a rough year for stocks, equity markets snapped a three-quarter losing streak with most indexes finishing positive for this quarter (4th).

“US equities were boosted by signs that inflation pressures had finally peaked.

“International equities were a particular bright spot, after China ended its zero COVID policy and political changes in the UK boosted market confidence.

“Energy and Utilities were the only sectors with positive returns for the year, while rate sensitive sectors such as technology and consumers discretionary finished deeply in the end.”

Furthermore by year-end 2022, international stocks began to outperform domestic sticks on a 12-month rolling basis, thanks largely to strong Q4 returns. “Over the last decade, there has been only one brief period (2017-2018) in which international stocks have outperformed their domestic counterparts.

“The strengthening dollar has been a major factor behind domestic stock dominance, as foreign revenues have simply translated into fewer dollars.

“The price of oil has been correlated with both domestic stock prices and the dollar, since the US has historically been a net importer of oil. 

“Whether this relationship holds true in the future is unclear, since the US is expected to become a net oil exporter in 2023.”