The world goes into lockdown

A summary of the first quarter in charts could hardly ignore the coronavirus outbreak but how to illustrate something for which the data (most of which is backward-looking) is only just starting to emerge? This chart shows the devastating impact that lockdowns in many parts of the world have had on the freedom of movement that we took for granted until this year. In the European epicentre of the outbreak (at the time of writing), normal life has essentially been put on hold. The decision to impose draconian social distancing measures in order to slow the spread of Covid-19 and therefore to protect the ability of health services to cope with spiralling numbers of cases is having a profound impact on the global economy. It is this which will dominate next quarter’s charts as it becomes clear how deep and how long the inevitable recession is.

Source: Refinitiv, as at 23.3.20

The benefits of diversification

The market impact of the outbreak has, unsurprisingly, been dramatic. After a period of denial in the first six weeks of the year, the penny dropped in late February that this was not a problem that could be contained in a part of China that many people had not even heard of. In recent weeks, markets have tended to move in lockstep as it has become clear that we are all in this together. However, take a step back to the beginning of 2019 and the difference in performance since then is striking. China was pulling out of the crisis before the rest of the world had cottoned on to what was happening. Meanwhile the UK entered the outbreak in a weaker position, already worrying about a year of anticipated Brexit-related angst. The US has roughly retreated to where it started last year. As ever, diversification can help to smooth the investment journey.

Source: Refinitiv, as at 31.3.20, with income reinvested

% (as at 31 Mar) 2015-16 2016-17 2017-18 2018-19 2019-20
S&P 500 1.8 17.2 14.0 9.5 -7.0
FTSE 100 -15.3 23.3 0.2 7.7 -18.4
CSI 300 -22.8 2.8 26.2 -5.5 -7.9

Past performance is not a reliable indicator of future returns
Source: Refinitiv, as at 31.3.20 with income reinvested

Oil: a two-edged sword

The unsung story of the first quarter has been the collapse in the oil price. Obviously, this is related to the coronavirus outbreak - demand destruction (as a result of the grounding of many aircraft and industrial shutdowns) is one side of the oil price equation. But the major oil producers are also shooting themselves in the foot by ramping up supply in the face of falling consumption. It is hard to fathom how Saudi Arabia and Russia think that their opportunistic assault on North American Shale can end well. But there is at least a partial silver lining to the oil price cloud - cheaper energy and fuel will be a key contributor to recovering economic activity once the outbreak is finally contained. For businesses where energy is a significant input cost, the low cost of crude is a small but significant consolation in an otherwise difficult environment.

Source: Refinitiv, as at 31.3.20

% (as at 31 Mar) 2015-16 2016-17 2017-18 2018-19 2019-20
Brent Crude Oil -27.3 33.8 23.6 -1.6 -78.1

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 an investment. Investments in emerging markets can be more volatile than other more developed markets. For full 5 year performance figures please Market data.


One of the good things to have come out of the corona-crisis, and the enforced working from home arrangements forced on companies like Fidelity, is a general increase in the sharing of ideas between isolated groups of investors and analysts. 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, overseen by Paras Anand, Anna Stupnytska and Wen-Wen Lindroth. 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; Leigh Himsworth, portfolio manager; Ayesha Akbar, portfolio manager; Bill McQuaker, senior adviser; Neil Cable, head of real estate; Andrea Ianelli, fixed income investment director; and Natalie Briggs, Europe investment director.

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