Positive earnings outlook supports investment capital returns in Europe

JPMorgan European Discovery Trust plc

DirectorsTalk caught up with Katie Standley, Managing Director, at J.P. Morgan Asset Management, for a comment on the January 2022 performance of JPMorgan European Discovery Trust plc (LON:JEDT) and the economic outlook.

Katie commented:

“The trust underperformed its benchmark in January. Positive contributors to relative returns included an overweight position in non-life insurance and stock selection in leisure goods. Detractors included an overweight position and stock selection in software and computer service and holding no position in banks.”

Katie added, “Looking ahead, earnings growth is expected to remain strong over the medium term, though profit margins could come under pressure in the short run. Fixing of supply chain issues, a shift in spending from goods back to services, and strong household balance sheets and savings rates, mean developed world consumers are in a better shape to support the economic expansion.

Even though the pandemic has dislodged us from an environment of low inflation, we believe that headline inflation may have peaked – or will do so over spring – and from there, base effects from higher energy prices will allow inflation to moderate.

Uncertainty around new Covid-19 variants, escalating geopolitical tensions and heightened market volatility are likely to keep central banks flexible in the path towards a tighter policy.

The outlook remains positive and strong economic growth should provide support to equity markets.”

JPMorgan European Discovery Trust plc (LON:JEDT) is an investment trust company. The European Investment Trust JEDT objective is to achieve capital growth from a portfolio of quoted smaller companies in Europe, excluding the United Kingdom.

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