Month in review as of 30/06/2022
- JPMorgan European Discovery Trust plc (LON:JEDT) outperformed its benchmark in June.
- Positive contributors to relative returns included stock selection in real estate investment and services development and an overweight position in non-life insurance.
- Detractors included stock selection and an overweight position in electronic & electrical equipment and not holding banks.
- At a stock level, an overweight position in Ipsos, a French market research company, outperformed as demand for market insights continued unabated.
- An overweight position in Helvetia Holding, a Swiss insurance company, outperformed as increasing interest rates were a tailwind to the sector’s earnings.
- On the other hand, an overweight position in Nexans, a French cable manufacturer, detracted from performance as the economic slowdown could impact demand from the construction sector.
- An overweight position in TKH Group, a Belgian industrial holding, detracted from performance as the economic slowdown was a headwind to its earnings.
Looking ahead as of 30/06/2022
- Concerns around inflation remain at the centre of market volatility. The recent weakness in consumer sentiment could translate into sluggish consumer spending, affecting wholesale and retail sales in the months ahead.
- While a recession might not be deep, weakness in the economy could linger and a sluggish economic recovery would erode inflation pressures and wage growth. If the post-pandemic surge in demand fades and higher prices start to deter new spending, central banks may adopt a more gradual policy normalisation, compared with the hawkish rhetoric seen in the first half of 2022.
- While short-term risks remain, equity markets have already repriced significantly this year, reflecting some risks of a recession. While we would not be surprised to see a few occasional bouts of volatility, 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.