“This year opens with a dangerous cocktail of new threats.” These are the words George Osborne used last week to describe to a group of business leaders the global economic shocks threatening Britain’s financial wellbeing.

Osborne pointed to slowdowns in some of the world’s largest emerging economies – Brazil, Russia and China as major economic threats. Indeed, a one percentage point decline in the collective economic growth of the countries that make up the so-called BRICS nations (Brazil, Russia, India, China and South Africa) could, over the next two years, knock 0.4 percentage points off global growth – that’s a loss of around £205bn.

It’s not just on the economic front that things look worrying. Global stock markets started the New Year with a bang of the wrong kind with dramatic falls in China’s equity markets sending ripples across markets globally.

Markets have also been affected by growing tensions between Saudi Arabia and Iran with the oil price yesterday sinking below $35 per barrel for the first time since 2004. Equity markets are down more or less everywhere, and in many places considerably so.

Bottom line: there’s a lot for investors to be worried about. However, none of the current volatility should come as a big surprise. We have enjoyed a bull market for a number of years now, and as bull markets mature, volatility tends to rise. Does this mean the bull market is over? No – but the ride is likely to get bumpier.

As country and sector specific risks become more prominent, investors need to take a discriminating view. Don’t be put off by short-term volatility and stock market corrections. Corrections are a normal part of bull markets and can often be a good time to consider investing in equities as valuations become more attractive, giving investors the potential to generate above-average returns when the market rebounds.

Some of the worst historical short-term stock market losses were followed by rebounds and breaks to new highs. The below chart provides some useful context as to why it pays to look through volatility and take an unemotional, long-term approach to your investments. The worst thing you can do is stop and start investments – you will only run the risk of missing out on some of the best periods of returns.

For those who can stomach the short term ups and downs, the current gyrations could present some attractive opportunities in two of the most unloved places: China and Oil.

China: it’s about quality of growth

China is facing considerable headwinds to growth but it is the quality of growth (in other words more consumption and less debt-fuelled investment) that matters. That quality is beginning to show, especially in areas of the new economy where much of the country’s reform agenda is focused.

Wages are rising in many sectors of the new economy, reflecting the added value and higher skill content of the workforce as they move from manufacturing T-shirts and toys (work that has already moved to Asia’s frontier markets) to something further up the value curve with less low-end manufacturing content and higher service and consumption content.

China is full of entrepreneurs who have turned great ideas into great businesses. Tencent and Baidu sit alongside Alibaba in the top 10 biggest internet firms globally. These aren’t simply carbon copies of western companies such as Google, Facebook and Amazon. They have been innovated by Chinese entrepreneurs and work on completely different business models for an entirely different audience.

Most importantly, China’s stock markets are huge, broad and diverse which offers great bottom-up ideas irrespective of the macro environment. By not staying the course with China you may risk missing out on what could potentially be some of the biggest global success stories of the coming years.

Oil: winners & losers

With the oil price falling even further this year, many are speculating just how low the price could slide before producing countries act – many are betting on $20 a barrel as an absolute low.

Lower for longer oil has its winners and losers and the astute investor needs to be aware of this. First it’s important to distinguish between countries which are net exporters of oil and those which import oil.

Take India as a case in point. The country imports more than 85% of its oil, so the continuing impact of the glut on the world oil price constitutes a considerable tailwind for company earnings. It helps to depress inflation, which in turn pushes down interest rates and boosts domestic consumption.

The US meanwhile may be a significant producer of shale oil and gas, but America still imports more energy than it exports, and because it taxes fuel relatively lightly, the benefits of a lower oil price immediately trickle down to consumers. This should in turn boost US consumer discretionary companies. Funds like the BlackRock US Opportunities Fund and the Rathbone Global Opportunities Fund hold a significant slice of their holdings in US consumer cyclical stocks.

Five year performance

Maike Currie is investment director for personal investing at Fidelity International

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