Morningstar - Q1 2024 - 24

Dispatches
EXHIBIT 1
Most GBP Allocation Categories Lagged Their Benchmark Through October
Morningstar Category
GBP Allocation 0-20% Equity
GBP Allocation 20-40% Equity
GBP Allocation 40-60% Equity
GBP Allocation 60-80% Equity
GBP Allocation 80%+ Equity
GBP Flexible Allocation
Excess Return
0.6
-1.2
-2.1
-2.4
-3.2
-3.4
-4%
Source: Morningstar Direct. Data from Jan. 1, 2023, through Oct. 31, 2023.
-3
-2
-1
1
EXHIBIT 2
Equities Drove Performance in 2023
Performance Breakdown of Morningstar UK Moderate Target Allocation Index
5
0.1
-2.9
-5
-10
-6.7
2022
Source: Morningstar Direct. Data from Jan. 1, 2023, through Oct. 31, 2023.
2.0
0.4
-0.6
Asset Class
Equities
Bonds
Cash
When Swedish mechanics sought union talks with
Tesla TSLA, the carmaker stuck to its usual
line and turned them down. With a workforce of
120,000 globally, Tesla has consistently resisted
unionization, threatening workers with retaliation.
But while past attempts to unionize at Tesla
came to nothing, a monthlong strike in Sweden
has hobbled the electric car maker's distribution
in the country, as workers even outside
the automotive sector refuse to support Tesla's
operations. And the strike went international
in early December, when Danish dockworkers
represented by 3F, Denmark's largest union, said
they would no longer help transport Tesla
vehicles to Sweden. Automotive unions in other
countries are watching closely.
YTD 2023
EXHIBIT 2 shows the respective contributions
of equities, bonds, and cash to the total
return of the Morningstar UK Moderate Target
Allocation Index in 2022 and 2023. This
index consists of 50% equity/50% bonds and
cash. The exhibit shows that bonds
detracted far less in 2023 than they did in 2022,
but they were still a drag on performance.
Equities did most of the heavy lifting, while
higher interest rates also meant a better
assist from cash in 2023. A simplistic takeaway
is that an overweight to equities would
have provided multi-asset managers with a
performance advantage in 2022 and
2023, although the composition of their bond
24
Morningstar Q1 2024
and equity portfolios might look different to
an index.
Another difficulty for managers in 2023 was the
narrow concentration of equity returns, caused
by the artificial-intelligence-fueled outperformance
of U.S. mega-cap tech stocks. At a stylistic
level, global growth equities returned 11.3%
through October 2023 versus a gain of only 0.8%
for global value equities in GBP terms, a
sharp reversal from 2022. This underlines the
importance of equity selection.
Tom Mills is a senior analyst, multi-asset and alternatives,
with Morningstar Manager Research.
The strike started in late October, after Sweden's
IF Metall union had tried to get Tesla to accept
collective bargaining for years. Tesla's refusal to
negotiate with its Swedish mechanics " represents
a substantial threat to the Nordic country's
labor model, " IF Metall says. Soon after, several
trade unions took industrial action in solidarity
with the mechanics, refusing to perform
labor that aids the automaker until an agreement
is reached. The strike now involves mechanics,
electricians, builders, dockworkers, postal
workers, and painters.
Despite this coordinated action among different
unions in Sweden-something that is
technically illegal in many other European
countries and the U.S.-Tesla initially found ways
around the strikes and continued to roll out
new Teslas to Swedish buyers.
But when the Union of Service and Communication
Employees, or Seko, announced its solidarity
measures, things heated up for the electric
car manufacturer. Seko's strike involved a blockade
GREATER EUROPE
European Union
Europe Challenges
Tesla's Anti-Union
Model
Total Return Contribution %
https://www.morningstar.com/stocks/xnas/tsla/quote http://www.morningstar.co.uk
Morningstar - Q1 2024

Table of Contents for the Digital Edition of Morningstar - Q1 2024
