I’ve been writing the quarterly Fidelity Investment Outlook for nearly seven years now. I’m still surprised at how quickly it comes around. Surprised too at what a difference three months can make to the prevailing market mood.

The summer edition of the Outlook was launched this week against a very different economic and market backdrop than that for the April issue. In the spring, we were shell-shocked and trying to muster the courage to keep calm and carry on with our investments after a savage market reversal. This time, we are faced with a different problem - what to do after a dramatic recovery in prices. Two key themes of the latest report are: what shape the recovery and has the market gone too far, too fast?”

Obviously, the latest Outlook was dominated by Covid-19. In particular, I focused on the apparent mismatch between the still poor economic and medical news flow and the currently elevated level of the stock market.

The economy may not be experiencing the V-shaped recovery that everyone hoped for a few weeks ago but the stock market certainly did in April and May, even if it has tapered off somewhat in the last six weeks or so.

So, what the shape of the recovery might be is a key focus of the report. My current view is that W is the best description of the return to normality - a series of recoveries and relapses, before we eventually get back to some kind of new normal.

Looking into the main asset classes, the key changes are a slightly more cautious stance on shares and a modestly more positive take on the property sector. We were right to be positive on shares three months ago but the dramatic rally since March suggests the need to tread more carefully today. As for property, the widely publicised issues with retail and offices notwithstanding, the asset class is one of the few places left where investors can find a decent income.

Turning to the main regions, I’ve remained more cautious on the US than the rest of the world on valuation grounds. Wall Street has defied the sceptics during the spring recovery and that’s justified to a degree by the weighting of the US market to the best-performing sectors, technology and healthcare. Whether or not that continues to make sense will be determined by how the second quarter earnings season unfolds. This week sees the first results and we will have a much clearer idea in a few weeks of how US companies are faring.

I’m also a bit cautious about Japan. The country was already struggling before the pandemic struck, thanks to the introduction of a higher consumption tax. That has pushed the country into a technical recession even before the dreadful second quarter data arrives. Add in Japan’s dependence on healthy end demand in its key exports markets in China and the US, and there is good reason not to be too exposed to the Tokyo market.

I’m more positive on the UK, despite the numerous and well-rehearsed problems we face in our domestic economy. Brexit hangs like a cloud over the UK as we head towards a probable hard exit in January 2021. And the London market is weighted towards some of the worst sectors right now, financials and energy in particular. But there is a price for everything. And the UK is much cheaper than other markets, having lagged during the rebound.

Europe looks more interesting. The region has had quite a good crisis, with well-handled lockdowns keeping the outbreak under control. The ECB has been extremely supportive too. Add to that the high quality of the region’s companies, their relative defensiveness and the more highly evolved management of environmental, social and governance issues, and there is plenty to be optimistic about in Europe.

In Asia, it’s a mixed bag. The more affluent north of the region responded well to the pandemic and it has been first in and first out of the crisis. The south, India in particular, has a bigger problem on its hands. The issue in Asia is now not so much one of supply - the factories are humming again - but one of demand - will the consumers around the world return to their old high-spending ways?

There is always plenty to write about in the quarterly Outlook, and there was no shortage of topics this time around. In addition to all of the above, I looked at the US Presidential election in November, the performance of the New Year fund recommendations and a survey of investors we conducted recently.

I hope you enjoy my latest thoughts and find them useful.

Read full report here

Important information - Investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. Investments in emerging markets can be more volatile than other more developed markets. 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.