In the 10th episode of the Fidelity ETF Exchange - powered by FidelityConnects, co-hosts Étienne Joncas Bouchard and Katrina Wilson take a deep dive into Low Volatility Factor ETFs. This is the fourth of a five part series called Factors in Focus. In this series, Etienne and Katrina offer their outlook on various investment factors, describe how they have performed in the past, and most importantly how advisors and investors can incorporate them into their portfolios.

Recorded on November 26, 2020.

Hon. Rod Phillips, Minister of Finance of Ontario, joins makes his second appearance on FidelityConnects. Minister Phillips notes that the government had to pivot from the original budget scheduled to release in March 2020 due to the pandemic, and now recently released a three-year plan made with contingencies for various scenarios. The government hopes for more stability and clarity by March, in order to continue with the multi-year strategy. The original plan grew to $30 billion in direct support and contingency plans as the year carried on. Ontario’s plan includes massive expenditure into health care, long-term care, tax credits for seniors towards home renovations, and business tax reductions through property, electricity and payroll taxes. Minister Phillips notes that e-commerce and manufacturing appear strong and are greatly contributing towards the Canadian economy. Last year, one in 100 purchases were made online, whereas this year one in eight are. On the manufacturing side of things, more people are working in manufacturing than ever before, which bodes well for the outlook of reinvestment in Ontario. Attendance in auto plants have stayed at 95% throughout the pandemic, and the government is looking at these trends as signals of where to deploy future investment.

Recorded on November 27, 2020.

Dividend investor Don Newman discusses dividend-paying companies and dividend yields in today’s current environment and in the year ahead.  He says dividend-paying companies may be a great option for investors who are seeking yield. He says these companies are trading at a very attractive price, are maintaining their dividends, and yielding roughly the same amount at high-yield bonds and with more opportunity for upside capture as the economy reopens in 2021 and 2022.  Don stresses the importance of differentiating between secular winners and COVID winners.  For example COVID winners are soup companies and laptop manufacturers.  He says a portfolio built solely on COVID winners will be very imbalanced.

Portfolio Manager Steve Buller discusses his thoughts on the impact of a vaccine and the outlook for 2021.  In terms of vaccine news, Steve says a vaccine is positive for the economy and for commercial real estate.  He says it will be good for the gathering like retail, office and hotel sectors, which have been hit during the pandemic. He also touches upon on ESG investing.  He believes ESG is hugely topical in the broader equity market.  And in our world of real estate, the focus on CO2 emissions are on the physical buildings themselves.  As Steve looks ahead to 2021, he is most optimistic in data centres, manufactured housing and single family rentals.

Bruce MacDonald, portfolio manager of Fidelity Far East Fund, provides an outlook on Asian equity markets and where opportunities can be found overseas. Bruce believes there are two things that make Japan and Asia-Pacific more attractive than developed markets. First, the combined stimulus seen in these regions. The stimulus is 35% of GDP in developed countries, but only about 8% of the GDP of Japan and 4% of China’s GDP, resulting in much less of an impact on the economy. Second, the causalities of low interest rates. These have led to “zombie companies” – companies that are barely kept alive, making enough capital to service their debt, but not enough repay their debt. These zombies have a huge impact on capital, because they make an economy inefficient and will likely not generate growth.

Recorded on November 25, 2020.

Jurrien Timmer, Director of Global Macro, believes that if there is less fiscal stimulus relief now, and the Democrats take over in January, trillions of dollars could be released then. If the Republicans hold the Senate, however, there will likely be less relief, and the markets are pricing in that possibility. Jurrien thinks the market is struggling right now to do so, and as a result, the S&P 500 Index has been flat for several weeks as markets wait for more information. Last week, the markets saw $53 billion in inflows; while this is a large number, Jurrien notes there are still trillions in money market funds and hundreds of billions going in and out of bond funds. After years of outflow, he is not that surprised that equity funds are taking in billions. It could be a signal that investors are seeing a light at the end of the tunnel regarding COVID-19, and that there might be a better environment ahead in 2021.

Recorded on November 23, 2020.

As President-elect Joe Biden transitions into the White House, there are certain U.S. tax rules that could cause Canadians living and working in the United Sates significant issues.  Our tax and retirement expert Peter Bowen outlines the possible tax implications on Canadians and what it could mean for estate planning, foreign US assets, and many other tax issues. Main topics he covers in this podcast include: changes to personal tax rates, additional payroll taxes, targeting certain cohorts, itemized deductions, and expanding the Child & Dependent Care Tax Credit.  Peter says it’s currently unclear as to the extent of these changes to tax policies because control of the Senate is still up in the air.  But in the end whatever the outcome, there will be large implications on many tax issues such as tax credits and retirement contributions. 

Recorded on November 12, 2020.

Our experts Andrew Clee, VP of ETFs, and Paul Ma, VP and Lead Portfolio Strategist, weigh in on the best way to use ETFs to diversify your portfolio in times of market volatility, and how investors can optimize growth. Andrew Clee notes that the past decade has been dominated by growth managers, which has a lot to do with interest rates and low yields. Since the election, many investors have been taking a contrarian view and buying value ETFs. When news came of a vaccine, small-cap and value names rebounded, because they could do better than the market originally expected if we can get back to normal sometime soon. 

Recorded on November 19, 2020.

Jurrien Timmer, Director of Global Macro, joins us again to provide his weekly market commentary and global macro update. Jurrien notes that the market was broadening out nicely over the past week; on an absolute basis, that hasn’t come at the expense of growth. In the S&P 500 Index, 85% of stocks were above their 50-day moving average. There was also more positive news on a vaccine. Jurrien also notes that we are starting to see the gap between “reopening” stocks and “stay at home” stocks beginning to close, and small-cap value is also starting to participate. Additionally, Jurrien thinks that the signing of the Asia-Pacific Trade Agreement sends a message that the world economy is regionalizing; that would make sense, given the vulnerabilities COVID-19 has exposed.

Recorded on November 16, 2020.

Global dividend investor Ramona Persaud takes you through her worldview and describes where she is seeing opportunities and challenges. Ramona notes that the U.S. market has outperformed the rest of the world for a long time. Valuation dispersion – a reflection of the measure of interest in the U.S. vs. the lack of interest in the rest of the world – has remained very wide, and that seems justified, because fundamentals in the U.S. were better than in most of the rest of world. We are now at the point where the rest of the world is much cheaper than the U.S., and we have to decide whether it makes sense to make different regional allocations. If you believe in a global recovery, as Ramona does, it might make sense to rotate out of the U.S. and into other parts of the world. Ramona has been finding new ideas across sectors in Europe, particularly in the U.K., but also in continental Europe, as well as in emerging markets. 

Recorded on November 18, 2020.