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.
With the nation in lockdown, it was always inevitable that we would feel the economic impact sooner rather than later. Any one of the millions of employees who have been furloughed, whose businesses and livelihoods have been put on hold or whose jobs have been already axed, were already all too aware of the situation we were in. Now the official figures say it too.
The UK economy has shrunk at the fastest monthly rate on record as the coronavirus lockdown has hit demand and activity in every sector. In this sort of crisis it is really no surprise that output in the UK fell by 20.4% in April. According to data from the Office for National Statistics, this is by far the largest contraction since monthly records began in 1997 and follows a 5.8% contraction in March, the previous record fall.
With shops shuttered, offices closed down, high streets open for essentials only and the workforce furloughed, laid off or cautious about keeping their heads-down until the worst of it is over, we knew this was coming. The government’s attempts to keep people and businesses afloat has come at a huge financial cost - and one which will have to eventually be repaid in full.
It’s not pretty, but it is the result of a pandemic the like of which few living today have ever seen.
And it’s not just a UK problem either. Anyone who was expecting the US Federal Reserve chairman Jay Powell to use this week’s meeting of policymakers to project confidence that the US economy had turned a corner, will have been sorely disappointed.
Instead he told it like it is. And issued a negative assessment of the country’s economic prospects over the next few years.
The latest US jobless figures - 1.5 million new claims over the past week - are better than they have been. But the reality is that the picture is likely to be gloomy for both the US economy and the jobs market for quite some time to come. And indeed elsewhere outside the US too.
We’ve seen firms cutting jobs across the globe. Some of the UK’s biggest employers announced mass redundancies yesterday, with cross-sector redundancies and lay-offs at the likes of Centrica, Nissan, Heathrow Airport, Johnson Matthey and Bombardier, which produces wings for the Airbus A220.
Elsewhere Lufthansa, the German airline, said it was cutting 22,000 jobs. The airline employs more than 135,000 people worldwide, with about half of them in Germany.
World stock markets don’t like the sound of all this, plus there’s the additional worry of a second spike in the pandemic also on investors’ minds.
It is inevitable that comparisons to the global financial crisis of 2008 will be front of mind, and there is no doubt that we are in tough times. Falling stock markets are symptomatic of that.
Getting Britain back up and running is seen as a crucial way to turn the economy back around. It’s a tough balancing act, with growing calls for the two metre social distancing rule to be reduced to enable businesses to operate more viably, having to be weighed against the risk of doing that too soon and causing a dreaded second spike.
For us now, as investors, the task at hand is also largely to maintain balance and keep our investments on track. Opportunities will undoubtedly present themselves as the UK economy returns to health and the nation’s fund managers will be watching all sectors closely to spot early signs of the winners in the race back to economic health.
In our latest Select 50 interview, Ayesha Akbar, the manager of the Fidelity Select 50 Balanced Fund talks about just this.
Long term has to remain the focus, while we battle through the short-term impact of the pandemic. These are, as has become the phrase - unprecedented times. But by staying invested and keeping in the loop and up-to-date your long-term goals can be shielded from the worst of it.
More on the 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. You must ensure that any fund you choose to invest in is suitable for your own personal circumstances. Overseas investments will be affected by movements in currency exchange rates. Investments in emerging markets can be more volatile than other more developed markets. There is a risk that the issuers of bonds may not be able to repay the money they have borrowed or make interest payments. When interest rates rise, bonds may fall in value. Rising interest rates may cause the value of your investment to fall. 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.