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How to weather further storms in 2020

Emma-Lou Montgomery

Emma-Lou Montgomery - Fidelity Personal Investing

Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you invest.

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Storm Ciara, the winter storm that battered the UK with 80mph-plus winds and flooded vast areas after hours of torrential rain, had a plus side, apparently. It was behind what is being hailed as the fastest subsonic flight between New York and London.

A British Airways Boeing 747-436 flying from New York to London was propelled by tailwinds which saw it travelling at 825 mph as it rode a jet stream. Such was the force of that tailwind that it landed at Heathrow Airport 80 minutes ahead of schedule, having made the journey in a record four hours and 56 minutes.

We hear about tailwinds and headwinds, figurative if not literal ones, a lot when it comes to the world’s stock markets. Yesterday morning’s record-breaking transatlantic flight is a very real-world example of just how powerful a force tailwinds can be.

There was also a very real-world reminder of the impact that headwinds, which blow against the direction of travel, can have as well. Flights travelling at the same time, but in the opposite direction, from London to New York, took more than two and a half hours more than usual to reach their destination.

When it comes to figurative headwinds; the sort that keep central bankers, economists and market watchers awake at night, there are certainly more than enough to contend with at the moment.

From coronavirus to trade wars and let’s not forget Brexit or US president Donald Trump’s impeachment, the backdraft from a number of headwinds right now, is being felt in various corners of the world.

That though is not to say headwinds have to be entirely negative. As the British Airways jet has shown, sometimes a storm can produce some unexpectedly positive results.

Take the latest econo-political headwinds, which have all been weathered by the markets pretty well so far. The unsuccessful impeachment of Donald Trump has seen markets rise, not fall. In fact, much as they did when Bill Clinton was impeached in the 1990s. The US stock market continued to climb, even as the sordid details that emerged surrounding the then-president’s affair and subsequent lies about the affair, emerged.

Market bets that Trump would be impeached, but would not be removed from office, paid off. Instead, investors are looking ahead to the second half of 2020, when the US presidential election could be a source of volatility.

Even the coronovirus epidemic was being brushed off by markets last week, despite the death toll and the global spread growing.

One headwind that could have a negative impact though is the continued grounding of the 737 Max jet. With the planes - and their production - stalled until they get clearance following two fatal crashes, that is a problem that is not going away and in fact, keeps on getting worse.

Now, almost two months into the new year, there is no sign that the jets will be back in service any time soon, and that is very bad news.

And not just for the US economy, but also the airlines and travel companies, like Anglo-German TUI, the world’s biggest tour operator which are now racing to find secure seats on other airlines to fly holidaymakers overseas during the upcoming peak summer holiday season.

Boeing, which makes the 737 Max is the US’s largest exporter and a crucial part of America's manufacturing sector. With US factories already strained by the trade fight between the United States and China - and now the impact of the coronavirus - the ongoing Boeing stoppage can only add more pain.

Despite all this turmoil, the Fidelity Select 50 Balanced Fund is showing how taking a balanced approach, under the watchful eye of a highly-experienced manager, can give investors positive returns, despite the headwinds.

With a balanced risk profile, it is most likely to appeal to investors who are happy to take some risk with their investments, but not as much risk as they would get in an equities-only fund. The Select 50 Balanced Fund can invest in a mix of assets, from equities and commodities at the higher-risk end to bonds and cash at the ‘safer’ end of the risk spectrum.

In celebration of its second anniversary, manager Ayesha Akbar spoke to us about where she is currently looking for opportunities, what strengths and attributes she looks for in fellow managers, when she makes her choices for this fund of funds, and what the experiences of the past two years have taught her.

More on Fidelity Select 50 Balanced Fund

Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. Select 50 is not a personal recommendation to buy funds. Equally, if a fund you own is not on the Select 50, we're not recommending you sell it. Overseas investments will be affected by movements in currency exchange rates. You must ensure that any fund you choose to invest in is suitable for your own personal circumstances. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.

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