COVID-19 case numbers continued to worsen at an alarming rate across Europe and the US, to the extent we saw national lockdowns being reinstated in various countries, including France and Germany. Further progress is being made towards a vaccine, however, there were no major new breakthroughs in October.
All eyes were on the polls as the US election drew nearer. By the end of the month Biden was still comfortably ahead of President Trump, including in several key swing states such as Pennsylvania. Key data releases over the month included US third-quarter GDP, which came in at a record 33% annualised gain from the pandemic lows. Although this is a very strong number, overall GDP is still some 3.5% below the pre-virus level. Brexit talks continued, with fisheries and ‘level playing field’ considerations still the two main issues of contention.
Equity market returns over October were generally negative in local-currency terms, although performance in emerging markets was positive, in both absolute terms and relative to developed markets. Within developed markets, Europe was a notable laggard on a relative basis.
Performance across our strategies was mixed over the month, with strong relative and absolute returns from our emerging markets strategy, as well as strong relative returns from our Japanese strategy and external US growth manager, T Rowe Price. HDFC Bank was a top performer for the Trust this month, with our overweight position at the fund level benefiting overall returns given the stock’s outperformance of the broader market in October. Our holdings in Tencent and Shimano also contributed to relative returns, as did underweights to Apple and a lack of exposure to Tesla. In contrast, our position in SAP, a poor performer, detracted over October, as did our holding in Mastercard. We ended the month at a discount of 7.9%, having averaged a discount of 9.0% over October.
Looking forward, we expect challenges for economies and the corporate sector. It is likely that equity markets will have to navigate further turbulence over the coming months too. Nonetheless, F&C Investment Trust has a tremendous advantage through our corporate structure, which makes us well placed to withstand further market volatility. While we cannot tell with certainty when the current crisis will end, as always, we remain focused on the long-term opportunities, for the benefit of our shareholders.