European Selection Fund - Oct 2020
Factsheet: October 2020
The negative trends that begun in September persevered in October with the month ending with a chaotic week that saw the main indices shredding in excess of -6% within just a few days.
Markets were torn between the uncertain outcome of the U.S elections and the spectre of re-confinement augured by the second outbreak of Covid- 19 cases leading to overcrowded hospitals.
In this context, European markets plunged: the Euro Stoxx 50 lost 7.38%, the CAC 40 lost 4.76% and the Stoxx Europe 600 lost 5.37%. Investors, who were worried by macroeconomic uncertainties, massively reduced their market exposure and sought refuge in other financial commodities (options, derivatives).
On the sectoral level, only the banks were able to stay on positive territory (+0.98%) whilst the technology sector (- 12.27%) sank after significant profit takings.
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The fund was more resilient than the indices, with a decline of only 4.92% and further enhanced this year's outperformance.
Only the most defensive stocks held up well: Pernod Ricard gained +2.18%, while Spirax-Sarco, the British specialist in industrial fluid control, continued its momentum (+2.97%) reading new all-time highs in September and October.
Conversely, Euronext, one of Europe's leading stock exchanges, fell by 16.23% after an excellent performance so far this year (+22.13% after this correction). We see here the combined effect of profit-taking by certain investors and doubts about the integration costs relating to the acquisition of Borsa Italiana, which the London Stock Exchange must unravel in order to comply with the European Commission's decisions on competition.
After a tense end of the month, markets seem to have partially factored in the effects of the re-confinement and the uncertainties related to the presidential elections. In the U.S, where the wait now is for the Senate elections to be held in early 2021, which will define the room for manoeuvre of the incoming government.
Europe is likely to see sustained liquidity injections in the markets coupled with rates being kept low, which will undoubtedly support the system. Despite extended and tightened containment measures and a GDP that is expected to contract in Q4, PMI indicators are positive and reflect the strong rebound in growth sectors in Q3.
Despite the tensions and macroeconomic concerns, our funds continue to significantly outperform the indices and once again show better resistance in times of distress.
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