Equities market returns globally were generally negative, against a backdrop of a worsening COVID-19 situation and rising geopolitical risks.
COVID-19 remains a key focus for markets, with infections rising in most of Europe, notably Spain, France and the UK, although hospitalisation and death rates were relatively low compared with the first wave. Governments have been tightening restrictions, with some countries reinstating partial lockdowns, and speculation is growing as to the likelihood of further measures being taken. While news on infection rates is troubling, there are positive expectations in terms of vaccine developments – the Oxford trials resumed after a short pause, for example.
News of a further US fiscal package was expected but didn’t materialise, which weighed on US equities. Uncertainty as to the outcome of the election has also continued to rise as we draw closer to November. The first Presidential debate at the end of September did little to alter the current odds, and President Trump faces an uphill battle. Brexit is once again back on the agenda, although little tangible progress has been made towards a deal that is acceptable to both the UK and EU. With a deadline of November to finalise the future relationship, the pressure is on both sides to come to some form of agreement.
Equity market performance over September was generally negative in local-currency terms, with emerging markets broadly outperforming developed markets. The US lagged on a relative basis. Performance across our strategies was mixed over the month, with strong relative and absolute returns from our Japanese strategy, as well as strong relative returns from our European and global income strategies. Hoya Corp was a top performer for the Trust this month, and positions in Keyence Corp and Smurfit Kappa also contributed to returns. In contrast, our holding in Wizz Air detracted over September, as did our position in Facebook. We ended the month at a discount of 10.7%, having averaged a discount of 10.3% over September.
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.
All information as at 30 September 2020, unless stated otherwise.