The 2023 investment outlook document discusses three main themes: navigating the polycrisis of inflation, recession and financial stability risks; implications of dollar dominance; and China's economic transition. It sees an 80% chance of a recession in major economies in 2023, with a cyclical shallow recession in the US as most likely. Inflation will remain elevated due to structural factors. Central banks face challenges in controlling inflation without causing severe economic downturns. The strong dollar poses headwinds globally. China is expected to gradually ease COVID restrictions and transition to a new growth model under its new leadership.

1. For investment professional use only and not for general public distribution
FIL Investment Management
November 2022
Navigating the polycrisis
2023 Investment Outlook
Danish Defence shows the gas leaking at Nord Stream 2 seen from the Danish F-16 interceptor on Bornholm, Denmark on September 27,
2022. (Photos by Danish Defence/Anadolu Agency, STR/AFP, Alfred Gescheidt, SERGEY BOBOK/AFP, Kevin Dietsch via Getty Images)

2. 2
Three themes for 2023
Source: Fidelity International, November 2022
Navigating the
polycrisis
Implications of
dollar dominance
China transitions
▪ Financial stability joins inflation and recession as a third pillar of risk. Aggressive Fed policy to control high inflation risks a
severe recession and/or global financial instability, but overly tentative policy could allow inflation expectations to embed.
▪ We maintain our base case for recession in 2023, first in Europe, then the US. Severity will be influenced by Fed policy, gas
flows and fiscal response in Europe, and China’s recovery. We see a cyclical (shallow) recession in the US as most likely.
▪ We believe structurally higher inflation resulting from the energy transition, demographics and reshoring will continue to be a key
driving factor throughout 2023, even as supply chains ease.
▪ Interest rate differentials have driven the dollar ever higher, creating headwinds for countries dependent on trade, with large
external debt burdens, and/or maintaining a currency peg. Vulnerability is highest among emerging markets.
▪ We see chances for a Plaza 2.0 type global accord on controlling the dollar as low in the absence of a full-blown currency crisis.
In the meantime, central banks including the BOJ and HKMA must ramp up efforts to defend currencies.
▪ The strong dollar will have varying effects on corporates, with upside and downside risks for margins and earnings.
▪ China’s strict anti-Covid measures should begin to ease in 2023. However, we expect loosening to be gradual.
▪ Key meetings in December 2022 and in Q1 2023 should provide the first clues about the new Politburo’s economic strategy.
Areas to watch closely include the path of property sector reform, national security, decarbonisation, and digitisation.
▪ We expect increasingly accommodative policy in 2023, with higher levels of investment in targeted sectors and potentially more
easing from the PBOC. However, stimulus will be subject to gov’t priorities of reasonable growth and common prosperity.

3. 3 This is for investment professionals only and should not be relied upon by private investors
Real estate
Private
markets
Fixed
income
Equities
Asset
Allocation
Implications of
dollar
dominance
Navigating the
polycrisis
China
transitions
▪ Defensively positioned: underweight
equities and credit, overweight
government bonds and overweight cash.
▪ Prefer the safer haven of US equities to
Europe. Neutral on the UK, Japan, EM.
▪ In credit, we prefer IG for
defensiveness and better value;
underweight EMD on strong dollar and
rising real yields.
▪ Extreme vol and large tail risks leave
us with less conviction on government
bonds but we start the year with an
overweight to offset the credit UW.
▪ Despite appreciation, dollar remains
the key safe haven. Higher terminal
rates, stubborn inflation and weak
sentiment still support dollar strength.
▪ EMFX has not depreciated in line with
other major USD crosses, suggesting
more downside is possible.
▪ This, and Fed hawkishness,
slowing global growth and RMB
weakness, underlie our
underweight in EMFX.
▪ China is undergoing a transition
phase. The gradual bifurcation of
China and the West will continue.
▪ While this may be a growth drag for
China, a reconfiguring of supply chains
will provide opportunities as well,
including in Mexico, Canada, LatAm,
Thailand and Vietnam.
▪ We are underweight the RMB on the
drivers outlined above.
▪ Cautious on global equities. We are
looking to invest in high quality stocks
that are best placed to weather market
volatility.
▪ It is a good time to remain highly
selective with a strong focus on
companies' balance sheets and funding
positions as the
economic downturn takes hold.
▪ Most bullish versus consensus in Asia
Pacific ex Japan, particularly the
Asean markets and India.
▪ Strong dollar remains detrimental to
stocks, even US corporates,
as dollar value of foreign profits
shrinks.
▪ When the Fed eventually pivots, a
weak US economy could result in a
weaker dollar, which would be
supportive for global equities.
▪ We remain cognizant that market
volatility and tail risks could send
markets lower if left unchecked.
▪ China offers a strong medium-term
opportunity, though economic recovery
will be gradual, with both sector and
stock selection key drivers.
▪ Domestic earnings will improve,
against the backdrop of renewed
levels of investment in
infrastructure.
▪ We are positive on consumer staples,
financials, and healthcare.
▪ Defensive and highly selective in the
near-term, continued exposure to IG
where valuations remain relatively
attractive.
▪ US and core Europe duration are
relatively attractive, considering hard
landing risks in both regions.
▪ We remain neutral on UK duration
given the extremely high level
of volatility, dependence on future
fiscal policy and the BoE’s reaction
function.
▪ Policymakers will eventually re-
prioritise growth, as inflation begins to
ease. An inflection point would offer a
significant reprieve to fixed income
asset classes and support total returns.
▪ We believe rates will ultimately settle
far higher than they have at any point
over the past decade.
▪ We have a constructive outlook on
China, due to expectations of
reopening and other supportive
developments, such as easing in
property market regulation and
funding support for developers to ease
liquidity shortages.
▪ Therefore we are selectively
overweight China assets.
▪ Private markets are not immune to
volatility but likely to fare better than
other asset classes due to inherent
features, such as floating rate
structures that hedge against rising
rates.
▪ Underlying credit metrics remain
robust, with less exposure to CCC-
rated credits than in previous
downturns (e.g. 4% in Oct 2022 vs 10%
in Jan 2007).
▪ Current valuations have priced in
downside risks in excess of all-time
lows, suggesting strong positive
returns over a medium- term horizon.
▪ The market is dominated by defensive
sectors, e.g. healthcare, services, &
media/telecoms, but security selection
remains key.
▪ The maturity wall is not an immediate
risk. Default rates are likely to step up
but not to the same levels seen in the
GFC.
▪ Although little direct exposure to
China, many credits in the private
markets have faced supply-chain
issues due to the Zero-Covid policy.
Easing of restrictions will be
beneficial, although the timing
remains uncertain.
▪ Chinese growth is not expected to
return to the strongest levels historically,
but private markets are likely to be less
impacted.
▪ We expect an economic hard landing in
our regions, however this could allow
more attractively-priced opportunities to
emerge in the real estate market.
▪ We expect this Real Estate cycle to
be shorter and shallower than
previous cycles, due to greater
transparency in the markets, so
values will adjust more quickly.
▪ The nature of the hard landing will
cast an even sharper light on energy
costs and as such, “green” buildings
are already commanding higher
rents. Demand remains strong given
market conditions.
▪ With occupancy costs rising rapidly,
we expect there to be more pressure
among occupiers to rationalise their
portfolios.
▪ Focus is on supply constrained
markets where rental values look more
resilient.
Key themes and their investment implications for 2023

4. Global Macro

5. 5
US current and future activity trackers EU current and future activity trackers
US future activity tracker by sector EU future activity tracker by sector
US activity resumed downturn in October; EU activity continues to deteriorate further
US and EU activity trackers
Source: Fidelity International, Fidelity Global Macro Research calculations, November 2022.
-4
-3
-2
-1
0
1
2
Apr-05
Jul-06
Oct-07
Jan-09
Apr-10
Jul-11
Oct-12
Jan-14
Apr-15
Jul-16
Oct-17
Jan-19
Apr-20
Jul-21
Oct-22
US Current Activity Tracker US Future Activity Tracker
-4
-3
-2
-1
0
1
2
3
Apr-05
Jul-06
Oct-07
Jan-09
Apr-10
Jul-11
Oct-12
Jan-14
Apr-15
Jul-16
Oct-17
Jan-19
Apr-20
Jul-21
Oct-22
Future Activity Tracker - Industry Future Activity Tracker - Services
Future Activity Tracker - Consumer
-5.0
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
Apr-05
Jun-06
Aug-07
Oct-08
Dec-09
Feb-11
Apr-12
Jun-13
Aug-14
Oct-15
Dec-16
Feb-18
Apr-19
Jun-20
Aug-21
Oct-22
EA Current Activity Tracker EA Future Activity Tracker
-4
-3
-2
-1
0
1
2
Apr-05
Jun-06
Aug-07
Oct-08
Dec-09
Feb-11
Apr-12
Jun-13
Aug-14
Oct-15
Dec-16
Feb-18
Apr-19
Jun-20
Aug-21
Oct-22
Z-Scores
Future Activity Tracker - Industry Future Activity Tracker - Services
Future Activity Tracker - Consumer

6. 6
Broad downside risks to global growth, with some pockets of strength mainly in EMs
Source: Fidelity International, Bloomberg, November 2022. Note: these scenarios and risk assessment are not intended to be exact growth forecasts, but rather illustrations of potential outcomes based on particular assumptions about a number of
variables, including the virus trajectory, monetary and fiscal policies and associated multipliers, corporate and consumer behaviour. Given significant uncertainties related to how the cycle might evolve in the aftermath of the pandemic, these
scenarios are subject to change. DM, EM and global aggregates are calculated including only countries that appear in the table, giving rise to potential differences vs aggregate consensus numbers quoted on Bloomberg, which include a wider
universe. We will be revising growth numbers and risk assessment continuously, as signals evolve and more information becomes available. *BBG consensus as of 1st November.
2023 growth forecasts
2023 Growth (Real GDP) BBG consensus* Fidelity upside case Fidelity downside case Risk assessment vs consensus
Global 2.6 3.2 1.3 Downside
Developed markets 0.3 0.9 -1.3 Downside
US 0.4 1.0 -1.0 Downside
Eurozone -0.1 0.5 -2.0 Downside
UK -0.4 0.0 -2.0 Downside
Japan 1.4 2.0 0.5 Balanced
Emerging markets 4.3 4.9 3.2 Downside
China 5.0 5.5 3.5 Downside
India 6.1 7.0 5.5 Balanced
Brazil 0.8 1.5 0.0 Balanced
Mexico 1.2 1.8 0.0 Downside
Turkey 3.0 3.5 2.0 Downside
Indonesia 5.0 5.5 3.2 Balanced

7. 7
Balance Sheet Recession Cyclical Recession Soft Landing Stagflation
Time horizon
Growth/Inflation
dynamics (delta)
Growth:
Inflation:
Growth:
Inflation:
Growth:
Inflation:
Growth:
Inflation:
Scenario narrative
US Fed overtightening driven by
unrelenting inflation pushes the
economy into a deep recession,
damaging balance sheets and
resulting a severe decline in
demand.
US Fed tightening pushes the economy into
a cyclical recession. However, an eventual
pivot by CBs combined with stronger
balance sheet positions in DM economies
cushion the shock, preventing a severe
downturn.
A combination of easing supply
disruptions and a resilient consumer
leads to avoidance of recession. CBs
manage to successfully control inflation,
with the economy remaining at near-
trend growth.
Political/supply-side pressures mean
Central Banks remain substantially
behind the curve. This leads to de-
anchoring in inflation expectations, which
subsequentially damages growth/ leads
to a recession.
Probability 25% 55% 10% (5%) 10% (15%)
Note: Brackets show last month’s probabilities. Growth/inflation arrows indicate deltas from current levels.
*Source: Fidelity International, November 2022.
Macro scenario analysis
Global Macro Scenario Grid (0-12 months horizon)
0-6m 6-12m 0-6m 6-12m 0-6m 6-12m
0-6m 6-12m
We see an 80% chance of a hard landing or recession, and a cyclical (shallow) recession as the most probable
outcome

8. 8
Cyclical (shallow) recession appears the most likely outcome in 2023
The historical relationship between tightening financial conditions
and the economy suggests a deep contraction is ahead…
Note: Real yield delta calc - Delta from max RY around a recession to T-12 months from the peak; *estimate based on
observed simple linear relationship between unemployment changes and RY changes. Cyclical recession bounds: 0.9%
<= Change in UR <= 3%.
Source: Fidelity International, Fidelity Global Macro Research calculations, November 2022.
…but the strength of balance sheets makes us more sanguine
US consumer revolving credit drawdowns as % of disposable income
Source: Fidelity International, Haver Analytics, November 2022.
4
5
6
7
8
9
10
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
%
of
disposable
personal
income
(annualised)
Current estimate*
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00
Change
in
unemployment
rate
per
recession
Change in 10Y Real Yield per recession
Balance sheet recession
Cyclical recession
Soft landing
Real yield tightening vs balance sheet resilience

9. 9
Global headline CPI rates (% YoY) Global core CPI rates (YoY)
Source: Fidelity International, Haver Analytics, November 2022.
DM core inflation has continued to surge higher
High and persistent inflation remains a priority for the Federal Reserve
Source: Fidelity International, Haver Analytics, November 2022.

10. 10
Federal Reserve ECB Bank of England
DM central banks: To pivot or not to pivot?
Source: Fidelity International, Bloomberg, October 2022.
Powell’s Fed is in “resolutely” hawkish mode, while the window for ECB and BOE tightening is rapidly closing
0
1
2
3
4
5
6
3
3.5
4
4.5
5
5.5
12/14/2022
02/01/2023
03/22/2023
05/03/2023
06/14/2023
07/26/2023
09/20/2023
Number of Hikes/Cuts Priced in (RHS)
Implied Policy Rate (%)
0
1
2
3
4
5
6
7
8
9
10
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
12/15/2022
02/02/2023
03/16/2023
05/04/2023
06/15/2023
07/27/2023
09/14/2023
Number of Hikes/Cuts priced in (RHS)
Implied Policy Rate (%)
0
1
2
3
4
5
6
7
8
2.5
3
3.5
4
4.5
5
12/15/2022
02/02/2023
03/23/2023
05/11/2023
06/22/2023
08/03/2023
09/21/2023
Number of Hikes/Cuts priced in (RHS)
Implied policy rate (%)

11. 11
New Politburo Standing Committee Zero Covid Policy Economic Policy
Economic meetings in Q4/Q1 should provide more clarity on key policy areas for 2023
China turns a page with the 20th Party Congress
Source: Fidelity International, government sources, Wind, GS, CREIS, Gao Hua Securities Research, November 2022
Position Member
General Secretary Xi Jinping
Premier Li Qiang
National People’s
Congress
Zhao Leji
Chinese People’s
Political Consultative
Conference
Wang Huning
First Secretary of the
Central Secretariat of
the CCP
Cai Qi
Secretary of the
Central Commission
for Discipline
Inspection
Li Xi
Executive Vice
Premier
Ding Xuexiang
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
0
50,000
100,000
150,000
200,000
250,000
300,000
22/01/01 22/04/01 22/07/01 22/10/01
Existing Asymptomatic Cases Under Observation
Existing Confirmed Cased
New Domestic Confirmed Cases + New
Domestic Asymptomatic Cases - Asymptomatic
Turned into Confirmed (RHS)
7
8
9
10
11
12
13
14
15
16
17
17/01 18/01 19/01 20/01 21/01 22/01
Percentage
change
TSF YoY
TSF: RMB Loan YoY

12. 12
Halting economic recovery so far Challenges remain in property Internal circulation and sustainable growth
The pace of re-opening, property sector reform and investment in infrastructure and strategic sectors
Key drivers of China growth
Source: Fidelity International, Bloomberg, November 2022. Source: Fidelity International, NBS, Wind, November 2022. Source: Fidelity International, NBS, Wind, November 2022.
30.00
35.00
40.00
45.00
50.00
55.00
60.00
65.00
17/01 18/01 19/01 20/01 21/01 22/01
PMI: Manufacturing PMI: Construction
PMI: Services
0
10
20
30
40
50
60
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52
Weekly Property Sales of Top 30 Cities
(Billion sm)
2019 2020
2021 2022
0.0
500.0
1,000.0
1,500.0
2,000.0
2,500.0
3,000.0
3,500.0
2018
2019
2020
2021
2022E
2023E
2024E
2025E
2026E
2027E
2028E
2029E
2030E
GWh
Battery Supply & Demand (CHINA)
Demand-China S/D-China
Supply-China

13. 13
BOJ FX intervention USD-HKD peg under pressure
Source: Fidelity International, Bloomberg, November 2022.
Rate differential driving dollar higher, causing upward pressure on USD-JPY and USD-HKD
Dollar strength is driving FX instability
70
80
90
100
110
120
130
140
150
-40
-20
0
20
40
60
80
100
120
140
1991
1993
1995
1996
1998
2000
2002
2004
2006
2007
2009
2011
2013
2015
2017
2018
2020
2022
USD
bn
FX intervention USD-JPY,RHS, reversed
USD sales
Asian financial crisis
USD purchases
Divergent
monetary policy
7.75
7.76
7.77
7.78
7.79
7.80
7.81
7.82
7.83
7.84
7.85
-120
-90
-60
-30
0
30
60
90
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22
HKMA FX intervention 10D rolling sum (HKD bn) USD-HKD (RHS, reversed)
HKMA sells USD,
buy HKD
HKMA buys USD,
sells HKD

14. 14
Est. first year of population contraction
Total population growth by decade
Source: Fidelity International, UN, World Prospects 2022: Summary of Results, 2022.
Demographic transition begins in China and Germany; Strategic asset allocation and the return of inflation
Structural long-term themes in 2023
Population growth
rate
Low
growth
Medium
growth
High
growth
Japan 2010 2010 2010
Germany 2022 2022 2044
China 2022 2023 2036
UK 2032 2056 N/A
US 2041 N/A N/A
World 2054 2087 N/A
US China Japan Germany UK World
1950s 19% 20% 12% 3% 5% 21%
1960s 14% 26% 12% 7% 6% 22%
1970s 11% 19% 12% -1% 1% 20%
1980s 11% 17% 5% 2% 2% 20%
1990s 14% 10% 3% 3% 3% 16%
2000s 10% 7% 1% 0% 7% 14%
2010s 8% 6% -2% 2% 7% 12%
2020s 5% -1% -5% -1% 3% 9%
2030s 4% -3% -6% -2% 2% 8%
2040s 2% -5% -7% -3% 1% 6%
2050s 1% -8% -7% -4% 0% 4%
2060s 2% -10% -8% -3% 0% 2%
2070s 1% -10% -7% -3% 0% 1%
2080s 0% -11% -6% -2% -1% 0%
2090s 0% -11% -6% -2% -1% -1%
Assumptions are based on proprietary modelling and reflect the views of investment professionals at Fidelity
International. Assumes a terminal real interest rate of -0.25%. Indices used: ICE BofAML US Treasury Index, ICE BofA
US Corporate Index, ICE BofA US High Yield Index, S&P 500 Index, MSCI US Property Index, direct senior loan data
modelled from Pitchbook and LCD. Source: Forward-looking estimates are based on proprietary models by Fidelity
International. Valuation baseline date: 29 July 2022
Ten-year average real return projections by inflation rate
-0.3%
1.0%
2.1%
1.6%
4.4% 4.4%
-1.4%
-0.2%
1.0%
0.6%
4.0%
3.4%
-2.4%
-1.3%
0.1%
0.0%
3.7%
2.5%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
Government
bonds
Investment
grade
High yield Real estate Direct lending Equity
Real
returns
(%
pa)
Inflation average 3% Inflation average 4% Inflation average 5%

15. Global Investment Research

16. 16
Global corporate indicators remain near pandemic lows
-0.60
-0.40
-0.20
0.00
0.20
0.40
0.60
0.80
1.00
Apr-20 Jun-20 Aug-20 Oct-20 Dec-20 Feb-21 Apr-21 Jun-21 Aug-21 Oct-21 Dec-21 Feb-22 Apr-22 Jun-22 Aug-22 Oct-22
Weighted
average
of
responses
Leading indicators Management sentiment
Source: Fidelity International Global Investment Research, October 2022 Analyst Survey.
Monthly survey of Fidelity analysts shows aggregated investee companies' confidence has yet to return

17. 17
Costs continue to rise, but acceleration is slowing for non-labour costs and
stabilising for labour
-0.40
-0.20
0.00
0.20
0.40
0.60
0.80
1.00
1.20
Jul-20 Sep-20 Nov-20 Jan-21 Mar-21 May-21 Jul-21 Sep-21 Nov-21 Jan-22 Mar-22 May-22 Jul-22 Sep-22
Total labour costs Total non-labour costs
Source: Fidelity International Global Investment Research, October 2022 Analyst Survey.

18. 18
Most analysts unconcerned by debt affordability as real yields rise
Region Sector
Source: Fidelity International Global Investment Research, October 2022 Analyst Survey. Question: “How concerned are you about real yields impacting debt affordability for your companies?”
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
China
Japan
Asia Pacific (ex China, ex Japan)
North America
Europe
EMEA / Latin America
Global
Unconcerned Somewhat concerned Very concerned
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Information technology
Consumer staples
Energy
Materials
Industrials
Healthcare
Financials
Consumer discretionary
Utilities
Communication Services
Unconcerned Somewhat concerned Very concerned
Companies from the IT, consumer, staples, and energy sectors are the most sanguine, while companies in Asia
are calmer than those in Europe and the US

19. 19
Revenue growth will continue to ease in most places, having seen a significant
drop-off since March
Source: Fidelity International Global Investment Research, September 2022 Analyst Survey. Chart shows weighted average of responses. Question: “What are your expectations for YoY revenue growth over the next 12 months compared to
current levels?” Note: Readings of zero appear as no bar on the chart.
Region Sector
Revenue growth
decreasing
Revenue growth
increasing
Revenue growth
decreasing
Revenue growth
increasing
-0.80 -0.40 0.00 0.40 0.80 1.20
EMEA/Latin America
North America
Europe
China
Asia Pacific (ex China ex Japan)
Japan
Global
Weighted net responses
Dec-21 Mar-22 Jun-22 Sep-22
-1.00 -0.50 0.00 0.50 1.00 1.50 2.00
Materials
Information technology
Consumer discretionary
Energy
Industrials
Telecoms
Financials
Healthcare
Consumer staples
Utilities
Weighted net responses
Dec-21 Mar-22 Jun-22 Sep-22
Revenues in energy, consumer discretionary, IT, and materials companies are expected to fall

20. 20
EBITDA margins are expected to decrease across the globe
Source: Fidelity International Global Investment Research, September 2022 Analyst Survey. Chart shows weighted average of responses. Question: “What are your expectations for EBITDA margins over the next 12 months compared to current
levels?” Note: Readings of zero appear as no bar on the chart.
Region Sector
Margins
decreasing
Margins
increasing
Margins
decreasing
Margins
increasing
-1.2 -0.8 -0.4 0 0.4 0.8 1.2
EMEA/Latin America
North America
Europe
Japan
China
Asia Pacific (ex China ex Japan)
Global
Weighted net responses
Dec-21 Mar-22 Jun-22 Sep-22
-1.50 -1.00 -0.50 0.00 0.50 1.00 1.50
Materials
Energy
Consumer discretionary
Industrials
Information technology
Telecoms
Financials
Consumer staples
Healthcare
Utilities
Weighted net responses
Dec-21 Mar-22 Jun-22 Sep-22

21. 21
Companies’ investment plans had remained strong over early 2022, but most
sectors are now slowing down or even contracting their plans
Source: Fidelity International Global Investment Research, September 2022 Analyst Survey. Chart shows weighted average of responses. Question: “What are your expectations for capex over the next 12 months compared to current levels?”
Note: Readings of zero appear as no bar on the chart.
Region Sector
Capex
decreasing
Capex
increasing
Capex
decreasing
Capex
increasing
-1.00 -0.50 0.00 0.50 1.00
EMEA/Latin America
Japan
China
North America
Europe
Asia Pacific (ex China ex Japan)
Global
Weighted net responses
Dec-21 Mar-22 Jun-22 Sep-22
-0.40 0.10 0.60 1.10 1.60
Consumer discretionary
Information technology
Financials
Consumer staples
Industrials
Materials
Healthcare
Telecoms
Energy
Utilities
Weighted net responses
Dec-21 Mar-22 Jun-22 Sep-22

22. 22
Analysts expect workforce growth to slow over 2023
Source: Fidelity International Global Investment Research, September 2022 Analyst Survey. Chart shows average of responses. Question: “How, if at all, do you expect workforce sizes at your companies to change from current levels over the
next 12 months?”
Region Sector
-4% 0% 4% 8%
EMEA/Latin America
Europe
North America
Japan
China
Asia Pacific (ex China ex Japan)
Global
Expected change in workforce size
Dec-21 Mar-22 Jun-22 Sep-22
-8% -4% 0% 4% 8% 12%
Consumer discretionary
Telecoms
Materials
Consumer staples
Financials
Industrials
Utilities
Healthcare
Energy
Information technology
Expected change in workforce size
Dec-21 Mar-22 Jun-22 Sep-22

23. 23
Opinion is split over when inflation will peak (or whether it already has)
Region Sector
Source: Fidelity International Global Investment Research, September 2022 Analyst Survey. Question: “When do you expect input cost pressure will peak (or has peaked) for companies?”
0% 20% 40% 60% 80% 100%
Asia Pacific (ex China, ex Japan)
China
EMEA / Latin America
Europe
Japan
North America
Global
Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 H2 2023 2024 or later
0% 20% 40% 60% 80% 100%
Communication Services
Consumer Discretionary
Consumer Staples
Energy
Financials
Healthcare
Industrials
Information Technology
Materials
Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 H2 2023 2024 or later

24. Multi Asset

25. 25
Staying defensive in preparation for a hard landing
▪ We are expecting a hard landing in 2023 as growth
slows and central banks tighten to control inflation. We
believe that the deteriorating macroeconomic outlook
is not yet fully reflected in earnings forecasts or
valuations, suggesting further downside to come. We
are positioned defensively, underweight equities and
credit.
Government bonds will play a role in 2023
▪ Bonds of all stripes have had a challenging 2022. But
in a hard landing scenario in 2023 that sees growth fall
and central banks turn less hawkish, duration, and in
particular government bonds, could have an important
role to play to diversify multi asset portfolios. This will
be especially true if stock/bond correlations turn
negative again.
Dollar strength to continue for now
▪ Although a Fed pivot will arrive some time in 2023, as
we begin the year it does not look likely in the near
term. Higher terminal rates, stubborn inflation, and
weak sentiment suggest continued upwards
momentum for the dollar for now. This could cause
pressure on EM FX and EMD, especially given
weakness in China.
Deglobalisation will create winners and losers
▪ We believe the trend of deglobalisation and re- or
near-shoring will continue in 2023. The reconfiguring
of supply chains and global trade will produce winners
and losers and create new trading blocs around the
centres of gravity of the US and China.
Multi Asset: Key takeaways

26. 26
Source: Fidelity International, October 2022
Key views and asset allocations
Core views Core asset allocation Other investment implications
Global centrals banks are doing ‘whatever it takes’ to
fight inflation for now
▪ Prefer Cash vs Equity
▪ Buy European and US bank equities
▪ Allocate away from US Growth
▪ Prefer Australian government bonds vs. US, Europe
▪ Buy US Dollar, sell select Asia FX
▪ Avoid US Homebuilder equities
▪ Long Volatility
Hard landing is highly likely in 2023
▪ Prefer Sovereign Bonds vs Corporate Bonds
▪ Prefer Investment Grade vs EM $ Debt
▪ Prefer US Healthcare
▪ Prefer Spain Sovereign Credit vs. US IG Corporate
Credit
▪ Prefer resilient economy equities (India, Singapore
banks)
▪ Avoid Global Semiconductor equities
The energy price shock will continue to disrupt,
especially in Europe
▪ Allocate away from European Equity (vs. e.g. US)
▪ Prefer European Staples vs European Industrials
▪ Prefer Korean equities vs German DAX, UK mid-caps
▪ Prefer Brazil, Indonesian Equities vs. World
China in transition - conditions remain challenging ▪ Buy USD, sell EM FX
▪ Prefer China A-Share Midcaps vs China CSI 300
▪ Asian Electric Vehicle beneficiaries vs China equity
index
▪ Longer-term structural trends of re- and near-shoring

27. 27
The tightening seen in monetary policy suggests equity market
valuations should still be significantly lower
With debt levels so high, government bond yields at these levels
may cause stress in credit markets
Source: Bloomberg, October 2022.
Remain underweight equities, and prefer sovereign bonds over corporate bonds
Staying defensive in preparation for a hard landing
Source: Haver Analytics, October 2022
0.5
1
1.5
2
2.5
3
3.5
4
4.5
38
40
42
44
46
48
50
52
Oct 2011 Apr 2013 Oct 2014 Apr 2016 Oct 2017 Apr 2019 Oct 2020 Apr 2022
US: Nonfinancial Corporations Debt Outstanding as a % of SAAR GDP
10-Year Treasury Note Yield at Constant Maturity % p.a.
-1.5
-1
-0.5
0
0.5
1
1.5
2
6
11
16
21
26
Oct-13 Oct-14 Oct-15 Oct-16 Oct-17 Oct-18 Oct-19 Oct-20 Oct-21 Oct-22
S&P 500: Forward P/E Ratio US Generic 10 Year Yield

28. 28
Bonds tend to outperform stocks when unemployment rises, as
it is forecast to do in 2023
Stock/bond correlation could turn negative again once central
banks slow pace of hiking
Source: Refinitiv, Fidelity International, October 2022.
Duration has had a tough year but could play an important role in 2023
Government bonds should provide diversification in hard landing scenario
Source: Refinitiv, Fidelity International, October 2022
2%
4%
6%
8%
10%
12%
6
12
24
1998 2002 2006 2010 2014 2018 2022
Global stocks vs bonds (LHS) US unemployment rate (RHS inverted)
-0.8
-0.6
-0.4
-0.2
0
0.2
0.4
0.6
1990 1994 1998 2002 2006 2010 2014 2018 2022
12m rolling stocks vs bonds correlcation

29. 29
-60%
-40%
-20%
0%
20%
40%
60%
Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22
Philippines Thailand India South Korea
The US central bank greatly increased its policy tightening
forecast in Q3, underpinning the strong US Dollar
EMFX has not yet fallen as much versus USD as most major
crosses, suggesting further USD strength could hit EM more
EMFX is not as cheap as G10 FX – but faces plunging foreign reserves and China fears
Strong dollar to continue for now, as Fed keeps ‘hiking for bad reasons’
Source: Haver Analytics, October 2022
3-month Change (% annualised): Foreign Reserves
Source: Bloomberg, October 2022.
3
3.2
3.4
3.6
3.8
4
4.2
4.4
4.6
4.8
2022 2023 2024
Fed ‘Dots’ – median forecasted policy rate
Before September Meeting After September Meeting

30. 30
US-China trade tensions to continue - countries such as Mexico,
Canada and Vietnam could benefit from increased US trade
Whereas Indonesia could build on relationship with China
World trade will grow, but supply chain reconfiguration will create winners and losers and new trading blocs
Deglobalisation and re-shoring trend will continue in 2023
2018=100. Source: Bloomberg, October 2022
2022 data to August. Source: US Census Bureau, Fidelity international, October 2022.
0
50
100
150
200
250
300
80
90
100
110
120
130
140
Aug-13 Aug-14 Aug-15 Aug-16 Aug-17 Aug-18 Aug-19 Aug-20 Aug-21 Aug-22
World Trade Volume (SA) [LHS]
Indonesia: Exports to China (SA, US$) [RHS]
US: Imports from China: Semiconductors & Other Electronic Components (SA, $) [RHS]
0%
5%
10%
15%
20%
25%
1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 2019 2022
% of total US trade in goods
Central and South America Canada
Mexico Thailand
Vietnam China

31. 31
-20
-10
0
10
20
30
40
50
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Germany: Producer Price Index: Total Industry excl Construction (y/y%)
US PPI: Finished Goods (y/y%)
European industry faces a price shock far greater than the rest
of the world, which will hurt profits and limit production
European growth underperformance is already showing up in
economic data
Source: BEA, Bundesbank; Haver Analytics, October 2022.
Europe likely faces a far worse winter than the rest of the world
Equity Regions: prefer US to Europe
Source: Markit, Haver Analytics; October 2022
30
35
40
45
50
55
60
65
70
Jan-18
Jul-18
Jan-19
Jul-19
Jan-20
Jul-20
Jan-21
Jul-21
Jan-22
Jul-22
Japan US Eurozone 50+ = Expansion
Manufacturing PMI New Orders (SA, 50+=Expansion)

32. 32
Source: Fidelity International, September 2022. Note: Red is Underweight; Grey is Neutral, and Green is Overweight; arrows signify change in positioning vs previous month.
Other Key Views
Commodities
• Underweight commodities overall as macro
headwinds have intensified.
• Energy still interesting, but recession risks
are outweighing supply/demand
fundamentals and make us neutral.
US Sectors
• Underweight consumer discretionary,
communication services, materials, and info
tech.
• Strong overweight healthcare, overweight
industrials, and real estate.
Thematics
• Long renewables/climate; long-term
sustainable theme meets near-term
demand from ongoing inflation/energy
crisis. Policy support.
• Long healthcare - Pricing power. Earnings
resilience in downturn. Only staples and
healthcare sectors had positive EPS
growth in past 6 recessions. Defensive
style.
Tactical Asset Allocation (TAA) at a glance: Cautious short term, more constructive
on medium-term outlook
Equity  Credit 
US  IG Credit 
Europe ex. UK  Global High Yield 
UK  EMD $ 
Japan 
Pacific ex. Japan 
EM 
Government bonds   Cash / Currencies  
US Treasuries  USD 
Euro core (Bund)  EUR 
UK Gilts  JPY 
Japan  GBP 
US TIPS  EM FX 

33. Equities

34. 34
We remain cautious on global equities
▪ Market volatility remains high as rate tightening at the
expense of growth will result in a hard landing.
▪ Strong dollar remains detrimental to stocks, even US
corporates as dollar value of foreign profits shrinks.
▪ Potential tail risks could send markets even lower if left
unchecked.
Earnings need further adjustment to reflect outlook
▪ Higher discount rates will continue to deflate multiples.
▪ Valuations are likely to come down further and net
downgrades are likely to spill over into H12023.
▪ However, readjustment of earnings expectations in the
first few quarters can turn caution into opportunity.
Diverging regions create selective entry points
▪ China offers a strong medium-term opportunity, though
an economic recovery will be gradual, with both sector
and stock selection key drivers.
▪ We are positive on Asia Pacific ex Japan, particularly
the Asean markets and India, amid robust multiyear
growth, underpinned by favourable demographics.
▪ US markets appear insulated with earnings cycle in
a “slowing but not contracting” mode. But a
sudden slowdown in growth could send stocks lower.
▪ European markets will remain underwater with no
end in sight with the energy crisis still on its doorstep.
Relief may be on the horizon
▪ Rate hike pivots from the Fed and ECB could provide
the catalyst to support growth and earnings.
▪ Weaker US employment data could result in a weaker
dollar, supportive for global equities.
Equities: Key takeaways

35. 35
Source: Refinitiv, Fidelity International, September 2022.
Valuations likely to come down further, net downgrades set to spill over into H1 2023
12m Forward Price to Earnings, MSCI AC World 12m Forward Dividend Yield, MSCI AC World
ICE BofA 1-10 Year US Inflation-Linked Treasury Index. Source: Refinitiv, Fidelity International, September 2022.
7x
11x
14x
18x
22x
26x
Jan 00 Jan 02 Jan 04 Jan 06 Jan 08 Jan 10 Jan 12 Jan 14 Jan 16 Jan 18 Jan 20 Jan 22
12m Forward PE Average +1 s/d +2 s/d -1 s/d -2 s/d
1.0%
2.0%
3.0%
4.0%
5.0%
Jan 00 Jan 02 Jan 04 Jan 06 Jan 08 Jan 10 Jan 12 Jan 14 Jan 16 Jan 18 Jan 20 Jan 22
12m DY (%) Average +1 s/d +2 s/d -1 s/d -2 s/d
Meanwhile, investors still have faith in dividend strategies. Forward dividend yields are picking up.

36. 36
Source: Refinitiv, Fidelity International, September 2022.
Earnings guidance could come under pressure
12m Forward EPS Growth (%) Consensus Global EPS Growth Estimates (%)
MSCI indices. Source: Refinitiv, Fidelity International, September 2022.
-7
0
7
14
21
28
35
Jan 00 Jan 02 Jan 04 Jan 06 Jan 08 Jan 10 Jan 12 Jan 14 Jan 16 Jan 18 Jan 20 Jan 22
12m Forward EPS Growth Rate (%) Average
+1 s/d +2 s/d
-1 s/d -2 s/d
-25.0
-15.0
-5.0
5.0
15.0
25.0
35.0
45.0
55.0
65.0
Jan
17
May
17
Sep
17
Jan
18
May
18
Sep
18
Jan
19
May
19
Sep
19
Jan
20
May
20
Sep
20
Jan
21
May
21
Sep
21
Jan
22
May
22
Sep
22
2018 2019 2020 2021 2022 N12m
Global forward earnings estimates may prove optimistic

37. 37
Most positive on Asia Pacific ex Japan (especially Asean)
Region Level Sector Level
Source: IBES, 30 September 2022. Source: IBES, 30 September 2022.
Consensus earnings forecasts, 2023
-20 -15 -10 -5 0 5 10 15 20 25
Cons. Discretionary
Utilities
Telecom
Financials
Cons. Staples
IT
Health Care
Industrials
Real Estate
Energy
Materials
2023 Est. (%)
0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0
Japan
Europe
EM
Global
US
Asia Pc ex Japan
2023 Est. (%)
Top sectors for earnings growth are consumer discretionary/utilities, bottom sectors are materials/energy

38. 38
Could provide investment opportunities for highest returning lenders in region
Financial inclusion an additional kicker to growth for Asean
Financial Services Penetration amongst Adult Population (>15yo), 2017
House Debt to GDP Ratio
Source: World Bank Global Findex database, CEIC, Eurostat, Singstat, New York Fed, September 2022. Note: Indonesia and Philippines household debt estimated using outstanding consumer loans.
69% 66%
51%
18% 15%
2%
20%
7% 4% 5% 5% 2% 0%
9% 24%
30%
61% 62%
51%
58%
25% 32%
49%
32% 44%
36%
22%
11% 18% 20% 23%
47%
23%
68% 65%
46%
63%
54%
64%
0%
20%
40%
60%
80%
100%
Vietnam Philippines Indonesia Thailand Malaysia Singapore China US UK EU South Korea Japan Australia
Unbanked (% without a Financial Account) Underbanked (% with Financial Account, but Have Not Borrowed from a FI or Credit Card)
Banked (% with Financial Account, and Have Borrowed from a FI or Credit Card)
0
20
40
60
80
100
120
140
Vietnam Philippines Indonesia Thailand Malaysia Singapore China US UK EU South Korea Japan Australia

39. Fixed Income

40. 40
Recessionary risks persist
▪ Inflation busts loom over several economies following
central bank tightening stubbornness
▪ Interest rates continue to rise even if policymakers are
forced to pivot
Remaining defensive
▪ We believe high yield credit is yet to price in 2023
recession risks. Prudent credit selection within high
yield is therefore essential.
▪ Where current high yield spreads would leave
investors more vulnerable in a rising default
environment, investment grade is offering a positive
“spread premium”
▪ We remain defensive, with continuing exposure to
investment grade bonds
Central banks pivot
▪ US and core Europe duration seem relatively
attractive, considering the risk of a hard landing.
▪ We expect policymakers will finally be forced into a
long-speculated pivot towards easier policy. The
difficulty over the past year has been predicting when
that will occur.
▪ Consumer price growth in the US and Europe has
remained stubbornly high, but the first falls may allow
central banks to finally shift
Bond yields finally starting to look attractive again
▪ We believe rates will settle far higher than they have
been at any point over the past decade
▪ This should be good for bonds, which have struggled
through a decade of zero yields
Fixed Income: Key takeaways

41. 41
Market continues to project rate hikes into year-end and well into 2023 while credit spreads widened in euro,
sterling and US, mainly driven by elevated macroeconomic concerns and a risk-off environment.
Source: Bloomberg, October 2022.
Recessionary risks persist
More rate hikes expected before the Fed pivots Global IG credit spreads
Source: Bloomberg, October 2022.
70
90
110
130
150
170
190
210
230
250
270
Dec-2021 Mar-2022 Jun-2022 Sep-2022
US IG Sterling IG Asia IG Euro IG
0
1
2
3
4
5
6
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
5.5
Number of Hikes/Cuts Priced in (RHS) Implied Policy Rate (%)

42. 42
Treasury illiquidity is near Covid downturn levels Market volatility in bonds, equities and oil
Source: Fidelity International, Bloomberg, IMF October 2022 Global Financial Stability Report, November 2022.
Rapid rate hikes expose weaknesses in the financial sector, e.g. UK LDI
Financial (in)stability
0
10
20
30
40
50
60
70
80
90
0
20
40
60
80
100
120
140
160
180
Jan-2020
Mar-2020
May-2020
Jul-2020
Sep-2020
Nov-2020
Jan-2021
Mar-2021
May-2021
Jul-2021
Sep-2021
Nov-2021
Jan-2022
Mar-2022
May-2022
Jul-2022
Sep-2022
MOVE Index IVOLVRUD Index
MOVE Index avg since inception IVOLCRUD Index avg since inception
VIX Index (RHS) VIX Index avg since inception (RHS)
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0
0.5
1
1.5
2
2.5
3
3.5
Jan-2020
Mar-2020
May-2020
Jul-2020
Sep-2020
Nov-2020
Jan-2021
Mar-2021
May-2021
Jul-2021
Sep-2021
Nov-2021
Jan-2022
Mar-2022
May-2022
Jul-2022
Sep-2022
Basis
Points
Index
10-Year Treasury Liquidity Index
10-Year Treasury Bid-Ask Spread (20-day MA, RHS)

43. 43
Current high yield spreads would leave investors more vulnerable in a rising default environment
Source: Fidelity International, Bloomberg. October 2022. Global High Yield Index: ICE BofA Global High Yield Constrained Index (HW0C), European High Yield Index: ICE BofA Global High Yield European Issuers Constrained Index (HQ0C) and US
High Yield Index: ICE BofA US High Yield Index (H0A0).
High yield spreads since 2022
0
500
1000
1500
2000
2500
02' 03' 04' 05' 06' 07' 08' 09' 10' 11' 12' 13' 14' 15' 16' 17' 18' 19' 20' 21' 22'
Global High Yield OAS (bps) European High Yield OAS (bps) US High Yield OAS (bps)

44. 44
Difference between corporate IG and dividend yields are back to pre-GFC levels
Source: Fidelity International, Bloomberg, October 2022. Chart shows US and Euro Bloomberg Agg Corporate Index minus respectively S&P 500 and STOXX Europe 600 gross aggregate dividend yields
Bonds are becoming attractive again
-6%
-4%
-2%
0%
2%
4%
6%
8%
02' 03' 04' 05' 06' 07' 08' 09' 10' 11' 12' 13' 14' 15' 16' 17' 18' 19' 20' 21' 22'
US Corporate IG yields minus dividend yields Europe Corporate IG yields minus dividend yields

45. Private Credit

46. 46
Structurally sound
▪ While not immune to recessionary trends, private credit
is likely to be more resistant than other asset classes
▪ Private credit's inherent strengths become key going into a
period of volatility: floating-rate structures can hedge
against rising rates, while leveraged loans are positioned
at most senior point of capital structure
▪ Market exposure in loans and direct lending dominated by
defensive sectors (healthcare, services, media/telecoms)
with high EBITDA margins and strong cash generation
Spreads allow robust returns over the long term
▪ Analysis of soft and hard-landing scenarios illustrates high
expected excess spreads currently priced into the market
with potential for spreads to tighten in the longer term
▪ Even in most difficult scenario, leveraged loans expected
to make positive net returns of around 8% including
Euribor over the next three to five years
Resilience throughout the worsening environment
▪ Default rates will increase but we believe are less likely to
reach the peaks of GFC due to added flexibility within
leveraged loan structures
▪ Maturity wall manageable, although some forced amend &
extends or defaults of 2024 maturities possible (this is less
likely on cov-lite loans). The proportion of CCC rated
names in the index remains manageable for time being
▪ During Covid, agencies took a lenient approach that
helped contain CCC downgrades. We do not expect rating
agencies to be as lenient in 2023
Security selection paramount
▪ The proportion of single-B rated loans is higher than
going into previous recessions, highlighting the need for
rigorous credit selection process
▪ Private credit lends to companies in the real world,
and the worsening economic backdrop will equally have
an impact across the private market
Private Credit: Key takeaways

47. 47
The market is pricing defaults materially higher than the worst period ever recorded. Even if we realised losses in
line with the worst ever period, investors could still see returns of c. 8%, not accounting for any outperformance of
the market due to active management
Source: Credit Suisse Western European Leveraged Loan Index - EUR Only DM to Maturity; CS US Leveraged Loan Index DM to Maturity; High Yield and IG ICE BAML OAS; Data as of 19-Oct-2022. Recovery Rates assumed at 60% for Leveraged Loans, 30%
for High Yield and 40% for IG based on historical recovery rates and seniority. HY and IG historical default rates based on S&P 2021 Annual Global Corporate Default And Rating Transition Study (1982 to 2021). Leveraged Loan historical default rates from
Morningstar US & European LL Indexes (2000 to 2022). EUR Leveraged Loans BDRs down to 41% with 30% Recovery Rates and 31% with 0% Recovery Rates.
Valuations suggest lenders are covered for default levels never before experienced
in the asset class
14% 15%
0%
11%
20%
1%
0%
10%
20%
30%
40%
50%
60%
70%
EUR Loans EUR HY EUR IG USD Loans USD HY USD IG
5-year Cumulative Default Rates – Market-implied Breakeven Default Rates for a Hold to Maturity Investor vs Worst Historical
Experience
Implied 5Y CDR Worst Historical 5Y CDR Average Historical 5Y CDR

48. 48
The leveraged loan market is in better shape heading into this expected recession than in previous crises, with
few pressing maturities and strong asset coverage on collateral
Private credit well positioned heading into volatility
Euro-denominated deals only. Source: Credit Suisse Western European Leveraged Loan Index; Fidelity
International, October 2022
Source: Pitchbook/LCD; Fidelity International, October 2022
€0bn
€2bn
€18bn
€39bn
€62bn
€37bn
€79bn
€31bn
€0bn
€10bn
€20bn
€30bn
€40bn
€50bn
€60bn
€70bn
€80bn
€90bn
2022 2023 2024 2025 2026 2027 2028 2029
EUR Loan maturities by rating
BBB BB B CCC NR
€28bn
€62bn
€53bn
€83bn pre-COVID maturity wall across
2023-25 pushed to 2027-9
0
1
2
3
4
5
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 YTD
2022
Average Pro Forma EBITDA/Cash Interest

49. 49
The composition of the European leveraged loan market showcases its resilience, with the proportion of CCC
ratings (which lead to greater selling and spreads widening) smaller now than before the GFC.
Rating stress tests indicate market’s ability to weather worst downside scenarios
Euro-denominated deals only. Source: Credit Suisse Western European Leveraged Loan Index; Fidelity International, October 2022
1%
20%
61%
18%
In GFC-style scenario
BBB BB B CCC/Split CCC
2%
23%
65%
10%
In hard landing scenario
BBB BB B CCC/Split CCC
0%
8%
72%
20%
In March 2009
BBB BB B CCC/Split CCC
0%
26%
64%
10%
In January 2007
BBB BB B CCC/CCC split
2%
26%
69%
4%
Current composition
BBB BB B CCC/Split CCC
Base scenario. We
believe 80% chance
of this
Assumes gas outages,
extreme consumer stress,
and limited fiscal or
monetary support

50. Real Estate

51. 51
Power has shifted to the buyer Shallower, shorter cycle
Sustainable opportunities will continue Occupiers (and some rents) surprisingly resilient so far
Real Estate: Key takeaways
▪ Achieved prices are now c.15% lower than sellers pricing
expectations (a reversal from Q1)
▪ Sellers are now having to accept a discount for liquidity as
there are fewer buyers on the side-lines - most investors with
capital are playing the waiting game
▪ A much deeper, broader pool of investors post GFC as people
have been investing more in private assets, should provide
more liquidity and a greater range of risk appetite
▪ US capital already targeting distressed assets and taking
advantage of currency
▪ Acute shortage of supply and abundance of demand for truly
sustainable buildings, notwithstanding market weakness
▪ There is increasing evidence of a green premium, for
example, in London, there is now a 25% price differential for
sustainable buildings (RCA, Oct 2022)
▪ Rents still rising across offices and industrials in most Western
European markets (MSCI, 2022)
▪ Demand weakening but still surprisingly strong with some
evidence of trading up to better quality space but reducing
total quantum (mostly offices and industrials)
▪ Repricing of retail which already began pre-Covid should
provide some resilience for rents and values

52. 52
European real estate is repricing
Negligible spreads over investment grade bond yields suggest mis-pricing of income risk
Yield spreads have narrowed faster than expected
-4
-2
0
2
4
6
8
Logistics
Office
DIY
Retail
Warehouse
Residential
Logistics
Office
Retail
Warehouse
Logistics
Office
Retail
Warehouse
Residential
Logistics
-
London
Logistics
-
Regions
Office
-
West
End
Office
-
Regions
Retail
warehouse
Germany France Netherlands UK
Spread over Eurozone Investment Grade bond yields 2021 Spread over Eurozone Investment Grade bond yields 2022
Source: Fidelity International, CBRE, September 2021 and September 2022; Bloomberg, as at 30/09/2021 and 26/09/2022.

53. 53
Pricing has shifted rapidly in favour of buyers
Sellers are having to pay a premium for liquidity
Price expectations gap for London and Paris offices
-20
-15
-10
-5
0
5
10
15
20
2007 Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2015 Q1 2016 Q1 2017 Q1 2018 Q1 2019 Q1 2020 Q1 2021 Q1 2022 Q1
Difference
between
asking
price
and
achieved
price
(%)
Paris London
Buyers’ market
Sellers’ market
Source: Fidelity International, Real Capital Analytics, October 2022.

54. 54
Rising energy prices increase occupancy costs in energy inefficient buildings
Demand for energy efficient buildings expected to grow, supporting rental values
Rents and energy costs as a % of total occupancy costs
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
West End Core New West End Core 20yo West End Core New West End Core 20yo Manchester new Manchester 20yo Manchester new Manchester 20yo
2021 2023 2021 2023
Net effective rent Energy
Source: Fidelity International, October 2022; Lambert Smith Hampton Total Office Costs Survey 2021. Analysis assumes a 4-fold increase in energy costs, a 10% increase in other costs and stable rental values from 2021 levels.

55. 55
Slowing from peak growth in current cycle has been rapid Liquidity in European markets appears to be holding up
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
t=0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57
Capital
value
growth
–
3
months
annualised
Months after peak 3-month annualised capital value growth (t=0)
UK all property capital value growth (3-months annualised)
1990s recession GFC Current cycle
40
50
60
70
80
90
100
08Q1
08Q3
09Q1
09Q3
10Q1
10Q3
11Q1
11Q3
12Q1
12Q3
13Q1
13Q3
14Q1
14Q3
15Q1
15Q3
16Q1
16Q3
17Q1
17Q3
18Q1
18Q3
19Q1
19Q3
20Q1
20Q3
21Q1
21Q3
22Q1
Capital
liquidity
score
Amsterdam Berlin Central London
Frankfurt Paris Central
Source: Fidelity International, MSCI UK Monthly Property Index, October 2022; Real Capital Analytics, Q2 2022.
We expect the cycle to be shorter and shallower, supported by greater market liquidity
Data indicates that a sharp repricing of real estate is underway

56. 56
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