FidelityConnects

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.

Fixed income portfolio manager Sri Tella discusses the impact of rising COVID-19 numbers and restrictions, as well as the U.S. election, on Canadian fixed income investors. Sri notes that the vaccine news from Pfizer and Moderna has boosted risk assets. He believes the news has moved up the timeline of things improving from an economic viewpoint, but there are still a lot of unknowns with regard to the vaccine and how the economy will respond. Sri believes the Bank of Canada has done a good job of adjusting the programs it has in place without actually creating any broad market impacts. The Bank has been clear about its rate outlook and has emphasized that rates will stay low for a long period of time. It has justified that position by pointing to weakness in the economy and the unevenness of the recovery: even though we saw good growth in the third quarter, it was coming back from a weak second quarter. According to any economic activity tracking measures, things are starting to slow down again, partly because of the second wave, but also because the easy lift-off from the trough has already happened.

Recorded on November 17, 2020.

Portfolio Managers Charlie Hebard and Michael Kim discuss the Fidelity Long-Term Leaders Fund.  Hebard and Kim are key members of the team managing the new fund. The fund was a brainchild of legendary investor Joel Tillinghast.  10 years ago, Tillinghast asked Fidelity’s research department to start identifying companies that had certain fundamental criteria of long-term leaders.  The in 2015, Fidelity launched a pilot using the fundamental signals developed by Joel and equity analysts. Last year, Fidelity U.S. launched the fund and then it was brought into Canada.  With hundreds of analysts around the world, Fidelity has the ability to identify long-term leaders no matter how small they are. Hebard, Kim and the rest of the team research companies for the fundamental analysts to help them gain conviction for an idea. The analysts then signal whether the company is a long-term leader.  The quantitative process takes the possibility of bias in the portfolio management decision out of the equation.  The team also analyzes business models in the U.S. to determine if and how those models might extrapolate to other countries and or cities.  Essentially, the fund is trying to capture secular long-term growth.

Recorded on November 6, 2020.