Wells has been generally supportive of the action of the European Central Bank (ECB) and says that policymakers have sent a clear message to the financial sector.
"Part of the message from Merkel and Sarkozy is that we are not in the situation of continual government bailouts. The financial world must pay," he said. "If there is a re-capitalisation of banks then equity investors are clearly going to be the ones who foot the bill. The lesson of the financial crisis is that banks always need more money than you think."
German chancellor Angela Merkel and French president Nicolas Sarkozy have been locked in talks this week to thrash out a satisfactory resolution to the debt crisis. Global financial markets have suffered as fears of widespread debt contagion refuse to abate.
"Investors in European bond funds have actually not had a bad time of it. The aggregate index is up 0.5 per cent over the month and 3 per cent in the year to date," Wells explained. "People haven’t lost money in absolute terms which is a very important point from an asset allocation point of view."
"Fixed income investors must be cautious of financial instruments. They are more volatile now than they were ever designed to be."
Data from FE Analytics shows that Fidelity’s flagship £3.1bn European fund has returned 3.4 per cent over five years, underperforming the MSCI Europe ex UK index, which has returned nearly 6 per cent. The fund is managed by Samuel Morse.
Performance of fund vs index over five years
Source: FE Analytics
Wells also warns that an over-emphasis on short-term data could act as a catalyst for another global downturn.
"Vast news-flow is getting us caught up in short-termism and intraday volatility. One thing that is clear is that we are in a much more uncertain world," he said.
"Indicators like consumer confidence and productivity levels are often lagging and can lead us into troubled waters if confidence goes in the economy, so this is an important period in the economic cycle, determining whether we can maintain a low-growth environment."
General sentiment in Europe is that political action has been too slow in market intervention but the fixed interest team at Fidelity has been largely supportive.
"There is some disappointment that the ECB isn’t going in aggressively buying everything and supporting, particularly on the pan-European bond programme," Wells continued. "But we think it would be wrong to do that. Europe needs to change, whether through fiscal stability or debt consolidation."
One solution to the debt crisis is the issuance of eurobonds. This will unify the segregated economies of the eurozone and allow the peripheries to borrow at a better rate.
However, Wells says that these bonds could send the wrong message to debt-laden economies.
"Eurobonds would solve one problem but it doesn’t solve the issue of the amount of debt outstanding. Core countries end up paying slightly more for debt and peripheries pay a bit less. It’s a mayonnaising of the debt problem across the whole of Europe."
"There must be a reality check for major governments balancing their books, but with a euro bond there would be less pressure to do so."