JPMorgan European Discovery Trust plc (LON:JEDT) has announced its November commentary.
Month in review
As of 30/11/2022
- The trust underperformed its benchmark in November.
- Positive contributors to relative returns included stock selection and an overweight position in media and an underweight position in telecommunications equipment.
- Detractors included stock selection and an overweight position in electronic & electrical equipment and stock selection in software & computer services.
- At a stock level, an overweight position in CTS Eventim, a German online event ticketing company, outperformed as pent-up demand for live events following the Covid-19 pandemic continued unabated.
- An overweight position in Melexis, a Belgian designer of automotive semiconductors, outperformed as demand for its products continued to outpace its supply growth potential.
- On the other hand, an overweight position in Nexans, a French manufacturer of electrical cables, underperformed due to concerns that demand from the construction industry is slowing.
- An overweight position in ERG, an Italian renewable energy producer, underperformed due to regulatory uncertainty related to windfall taxes.
Looking ahead
As of 30/11/2022
- Concerns around inflation remain at the centre of market volatility. We are likely to see pressure on aggregate demand due to lower discretionary consumer income. Recessionary fears and declining corporate margins could also reduce capital spending momentum.
- However, if we have a recession, it is likely to be a mild one as pent-up demand for labour, a lack of over-building in the most cyclical sectors of the economy, healthy bank balance sheets and an absence, so far, of some new macroeconomic shock seem to provide some protection against a worse outcome.
- As long as inflation is headed in the right direction, together with more obvious signs of economic weakness, central banks should be able to suspend further rate hikes early next year.
- It has already been a very tough year for investors. A painful sell-off in financial assets has led to much better valuations versus the start of the year. We believe equity markets could now offer an attractive entry point to the long-term investor.
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.
