Equities market returns globally were generally positive, with developed markets outperforming emerging markets against a backdrop of ongoing policy support and better-than-expected second-quarter earnings. However, COVID-19 infection rates in parts of Europe continued to climb, while growth in numbers of US cases appeared to have peaked.
COVID-19 case numbers worsened in parts of Europe, notably Spain and France, while new hotspots in India and parts of Australia have emerged, with a lockdown reinstated in the state of Victoria. On the more positive side, several major potential vaccines are in third-phase trials, with results expected in the coming months. Policy support remains in place, with central banks maintaining low interest rates and liquidity support. On the fiscal side, there was little progress in the US on agreeing a new support package, and time is running out before many of the substantial fiscal measures implemented earlier in the year expire. In Germany, however, there was more positive news as the coalition government agreed to an extension of COVID-19 relief measures. The second-quarter earnings season beat (low) expectations substantially, but the outlook is still highly uncertain.
Performance across all of our strategies was positive in absolute terms over the month, with notably strong absolute returns from both our external US Growth manager, T. Rowe Price, and our Japan strategy. Meanwhile, relative returns from our emerging-markets strategy were also positive. Salesforce was a top performer for the Trust this month, with our overweight position at the fund level benefiting overall returns given the stock’s strong performance in August. An overweight in Facebook and Mastercard also helped returns. In contrast, zero exposure to Tesla and an underweight in Apple detracted from relative returns.
We ended the month at a discount of 8.2%, having averaged a discount of 8.3% over August.
Looking forward, it is impossible to predict with confidence what the economic and corporate backdrop will look like over the next year. Countries and companies face many challenges and it is likely that equity markets will have to navigate some aftershocks, both economic and virus-related, over the coming months. 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 31 August 2020, unless stated otherwise.