JPMorgan European Discovery Trust plc (LON:JEDT) has announced its March commentary.
Month in review
As of 31/03/2023
- The trust outperformed its benchmark in March.
- Positive contributors to relative returns included stock selection in electronic & electrical equipment and software & computer services sectors.
- Detractors included stock selection in banks and leisure goods sectors.
- At a stock level, an overweight position in Prysmian, the Italian cable manufacturer, outperformed as investments to strengthen the European electricity grids continued.
- An overweight position in TKH Group, the Dutch industrial conglomerate, outperformed as the company continued to see strong demand for industrial automation, fibre optics and electrification cables.
- On the other hand, our overweight positions in BAWAG Group, the Austrian banking group and Banco de Sabadell, the Spanish bank, underperformed due to concerns about the financial sector’s health following the recent banking sector turmoil.
As of 31/03/2023
- Recent data points suggest that inflation has likely peaked and should fall from here. Additionally, a meaningful tightening of lending standards may, in effect, substitute for rate hikes and could help inflation to moderate further.
- However, further credit tightening that may result from the recent banking turmoil could represent a risk for the economy. This, together with the dwindling consumer and government spending, could reduce the aggregate demand within the economy. Whilst corporate profits have held up relatively well, margins are now starting to decline for many companies, and we expect weak profits in 2023.
- Nevertheless, moderating inflation, together with more obvious signs of economic weakness, could force central banks to reverse course and set the stage for a new multi-year period of low long-term interest rates supporting equity markets.
- Even though risks around the growth outlook continue to remain high, the current lower level of equity valuations, compared to the beginning of 2022, means that markets might be less vulnerable to risks including a recession, credit tightening, earning downgrades or higher interest rates.
JPMorgan European Discovery Trust plc (LON:JEDT) aims to provide capital growth from a diversified portfolio of smaller European companies (excluding the United Kingdom).