JPMorgan European Discovery Trust plc (LON:JEDT) has provided its February commentary.
Month in review
As of 28/02/2022
- The trust underperformed its benchmark in February.
- Positive contributors to relative returns included stock selection and an overweight position in electronic and electric equipment, and stock selection in construction & materials.
- Detractors included stock selection in software & computer services and industrial support services.
- At a stock level, an overweight position in Nexans, the French cable manufacturer, outperformed, as the company continues to benefit from very strong demand for electrification projects.
- An overweight position in Ipsos, the French market research company, outperformed, as it continues to see strong demand for research from both corporate and public authorities.
- On the other hand, an overweight position in Pirelli, the Italian tyre manufacturer, underperformed, as the company could suffer from increasing prices of raw materials.
- An overweight position in Vitrolife, the provider of equipment and consumables for IVF, underperformed because the company’s margins suffered from the rising prices of freight.
Looking ahead
As of 28/02/2022
- We have already started seeing higher commodity prices due to the ongoing geopolitical tensions, and any further escalation is likely to lead to further increases, especially in the short term.
- The reaction from central banks to higher energy prices by increasing interest rates, to combat inflation, or reduce their pace of tightening, to support the economy, will be key developments to watch out for. At this point, we expect central banks to prioritise growth, resulting in a more gradual policy normalisation cycle as they acknowledge the downside risks from higher commodity prices.
- We believe that there is still considerable pent-up demand, and a strong household balance sheet and savings rate should mean developed world consumers are in better shape to support the economic expansion over the medium term.
- Historically, geopolitical events, even those involving major energy producers, have not had a lasting impact on markets. While the ongoing geopolitical tensions and the prospect of higher interest rates may spark occasional bouts of volatility, we still believe the outlook for equities remains positive.
JPMorgan European Discovery Trust plc (LON:JEDT) is an investment trust company. The Investment Trust JEDT objective is to achieve capital growth from a portfolio of quoted smaller companies in Europe, excluding the United Kingdom.
