The uneven pandemic

Covid-19 is described as a global pandemic, but its spread around the world has been anything but even. Coronavirus may have made the leap from bats to people in China, but it didn’t stay in Asia for long and the death toll has been far worse relative to the size of the population in Europe and the Americas, both north and south. As the chart shows, Asia represents more than half the global population, but so far it accounts for less than 15% of Covid-related deaths. Europe and North America are home to less than a fifth of the world’s people but more than 60% of global deaths during the pandemic have been in those rich regions, normally so well protected from plague and pestilence. This tells us less about the disease, of course, and rather more about the differing politics and social norms of East and West. As for Africa - well for once it’s been given a break.

Source: Refinitiv, 30.9.20.

Same disease, different response

The impact of the pandemic may have been similar on both sides of the Atlantic, but the response of the respective stock markets could hardly have been more different. Both Wall Street and the London market fell sharply in February and March but the recovery in the US has been massively quicker and more powerful than it has been over here. The reasons are not hard to pinpoint. The US stock market is heavily weighted towards the pandemic’s winners, notably in technology, while the British index is biased towards the areas that investors have little interest in today - out of favour energy stocks and financials. The other principal cloud hanging over the UK market is, of course, Brexit. In three months, Britain will be out of Europe. What our relationship with our biggest trading partner will look like next year, however, remains a mystery.

Source: Refinitiv, 30.9.20.

Five year performance

% (as at 30 Sept) 2015-16 2016-17 2017-18 2018-19 2019-20
FTSE 100 18.4 11.2 6.1 3.2 -18.1
S&P 500 15.4 18.6 17.9 4.3 15.2

Source: Refinitiv, as at 30.9.20 with income reinvested, rebased to 100 on 1.1.20

Past performance is not a reliable indicator of future returns. When investing in overseas markets, changes in currency exchange rates may affect the value of your investment. 

Early-cycle valuations or revisited?

One of the most concerning charts at the moment is this one that shows valuations (particularly in the US) returning to the levels of the late 1990s technology boom. We know how that one ended. Actually, I think there is less to be concerned about than appears to be the case. That’s because earnings have been clobbered this time by the pandemic lockdowns around the world. Because share prices have moved quickly to anticipate a profits recovery, there is now a mismatch between reported numbers and share prices. In due course, rising earnings will bring valuation multiples down again, even if share prices stay at their current level. You can see that something similar happened after the financial crisis, albeit to a less alarming degree. Investment metrics can be helpful, but you do need to view them in context.

Source: Refinitiv, 1.9.20.

Past performance is not a reliable indicator of future returns. When investing in overseas markets, changes in currency exchange rates may affect the value of your investment.


The views in this report are derived from a variety of sources within and outside Fidelity International. They are based on the house view of the Fidelity investment team and other sources. However, the report is written for a UK personal investing audience and the ideas are explicitly linked to the Select 50 list of our preferred funds. We consider this to be the best way for our investors to implement the ideas discussed in the Outlook. I would like to thank, in particular: Jeremy Osborne, investment director in Tokyo; Gary Monaghan, investment director in Hong Kong; Leigh Himsworth, portfolio manager; Ayesha Akbar, portfolio manager; Jeremy Podger, portfolio manager; Neil Cable, head of real estate; Andrea Ianelli, fixed income investment director; Kasia Kiladis, US investment director; and Natalie Briggs, Europe investment director.

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