FidelityConnects

Jurrien Timmer, Director of Global Macro, provides his weekly global macro update. Jurrien takes a closer look at investors response to the ongoing COVID-19 crisis, and other factors influencing market expectations and reactions. Are investors too optimistic, or are they just right? This is the big question as Jurrien and host Pamela Ritchie look at two realities. Economic fundamentals in some ways are their weakest in history, but on the other hand, the stock market has bounced back from the March lows.

Follow @TimmerFidelity on Twitter for Jurrien’s comprehensive charts and graphs.

Recorded on May 11, 2020.

Sector strategist Denise Chisholm spends her time diving deep into data as she develops actionable and investable insights on sector analysis. Denise has a deep breadth of research and focuses on historical probability analysis, and in this podcast examines how different sectors and industries are uniquely positioned to weather the market challenges created by the COVID-19 pandemic.

Follow Denise Chisholm on LinkedIn for more analysis, including highlights from her Quarterly Sector Update Presentation for Q2 2020.

Recorded on May 7, 2020.

Steve MacMillan, portfolio manager of Fidelity American Equity Fund, Fidelity Small Cap America Fund and Fidelity CanAm Opportunities Class, acknowledges that this is a difficult time for investors, as there are cheap stocks on the market with poor fundamentals, and stocks with strong outlooks for their fundamentals that he perceives to have overly-high valuations. To avoid fundamental risk and valuation risk, Steve is looking for a middle ground. He seeks companies with high-earnings visibility and reasonable valuations, and believes the more defensive sectors of the stock market will lead more than they have in the last few months. 

Recorded on May 6, 2020.

Andrew Marchese, President and Chief Investment Officer at Fidelity Canada Asset Management (FCAM), is proud to work with a team that is highly skilled and diverse at what they do, which thrives off a foundation made from a strong research staff. Andrew uses price-to-book as a cheap valuation metric to find securities with strong financials at almost floor price. The second the market starts to take off, he has noticed the liquidity of the market has not been that great. Andrew counsels his portfolio managers to not chase securities in a heavy fashion when liquidity is not that great, because market impact may be high. Implementation short fall may also be high, which Andrew illustrates as you may believe you are buying a stock at “x” price, but you may actually be paying 10% more than that price, because of market movements. Andrew notes that FCAM is fortunate to have a great trading desk that knows the investment teams’ intentions and executes accordingly, which benefits performance and clients.

Recorded on May 5, 2020.

David Tulk, portfolio manager on Fidelity’s Global Asset Allocation (GAA) team, says the GAA team’s current investment approach is to look through the volatility and estimate what the markets will look like after COVID-19. They are still being cautious and investing selectively, analyzing both the policy response and the effects of COVID-19. The team adheres to a philosophy that balances equities and fixed income. The Canadian market could potentially see a more gradual and volatile economic recovery than other regions. David notes that this is one of the reasons the GAA team is currently less invested in, or “underweight,” Canadian equities. David also believes that high yield is an asset class in which investors will benefit from having a portfolio manager actively select securities, rather than passively tracking an index. An index might not capture pockets of value that may emerge outside of the energy sector, because indexes tend to be more invested in, or “overweight,” the energy sector. A defensive asset class the GAA team is focusing on is gold, which also picks up on other economic factors as a result of the pandemic, such as an increase in inflation.

Recorded on April 29, 2020.

Don Newman, director of research, and portfolio manager of Fidelity Dividend Plus Fund, continues to monitor the markets very closely as the severity and swiftness of the downturn has surprised investors. Prior to the current market downturn, Don had been cognizant of the length of this market cycle with the markets reaching historical highs, primarily off multiple expansion as opposed to quality earnings growth. In that market environment, Don had been taking below average risk. Although the current situation in the market, with regards to COVID-19 and the oil shock, has been unexpected, Don notes that selective individual stock valuations do look much more attractive now.

Recorded on April 29, 2020.

Jurrien Timmer, Director of Global Macro, provides his weekly global macro update. Jurrien notes that markets discount the future, they look ahead and this is one of the things that confuses many investors. Almost to the point, where people are skeptical that there is this disconnect between Wall Street and Main Street. Jurrien sees the current risk as the economy coming back and then seeing a relapse, not that the market has not priced in significant economic destruction. He perceives this to be a race against time, not only on the medical treatment side, but also on the economic side that the longer you stay locked down the more permanent damage you do to the economy.

Follow @TimmerFidelity on Twitter for Jurrien’s comprehensive charts and graphs.

Recorded on May 4, 2020.

Portfolio manager Jeff Moore is excited for the future, and believes in staying disciplined while sticking to his five-step process. Jeff, a fixed-income manager, has portfolio management responsibilities on several Fidelity funds, and emphasizes that the current economic climate should not be as concerning as the credit crisis in 2008, because he believes what we are currently experiencing is a short, intense period of uncertainty. Jeff expresses confidence in the construction of his portfolios, noting that a lot of the areas that may need big bailouts aren’t places his team has been. Jeff also notes now that we are seeing pockets of the world where the virus situation is improving and returning to normal, we might be able to start to identify how long this may go on in North America, and when the markets may start to make more sense. In this podcast, Jeff shares outlook for global fixed-income markets and the benefits of working with an experienced team.

Recorded on April 29, 2020.

Mark Schmehl, portfolio manager, speaks about his truly unique investment process, what is driving performance, and also his take on the markets. Mark has managed money through past market sell off and bounce backs, and says this is going to be a different economy, and that it is a time when active management is an asset for investors. Portfolio managers have the opportunity to find winners in these uncertain times and to position investors well for a market recovery. Aside from the technology sector and health care, he sees potential in sectors that were well positioned before COVID-19 and that will do well after, including home building and the financials sector. 

Recorded on April 29, 2020.

Andrew Clee, VP of ETFs, and Bobby Barnes, quantitative analyst, provide their outlook for ETFs during market volatility due to COVID-19. Andrew notes that over the last month, international equity has been a major winner in the Canadian ETF space and in the U.S., value equity has seen traction. He believes that trends occurring in the U.S. tend to spill over into Canada, so value equity may see more traction in the Canadian ETF market. Bobby notes the U.S. market’s pick-up in value may be perceived as investors being bullish and hopeful of the stock market having reached a bottom. He caveats that timing the market is extremely difficult and there is still uncertainty.

Andrew says pairing investments based on management styles (active, factor-based or passive) varies for each investor, it is important to consider financial goals and life stages. Andrew defines the difference between different types of ETFs: passive ETFs mimic the movements of an index (e.g. S&P 500 index), so the ETF will perform similarly to how the market performs. A factor ETF is more specific, as it mimics a custom index, which contrasts to a broad market index. Factor ETFs seek companies that have a specific factor (e.g. low-volatility companies). By comparison, actively managed mutual funds are ultimately run by portfolio managers who use both quantitative analysis and their insight from meeting with company executives. He alludes to the benefits of factor ETFs, as investors can focus on a specific outcome desired for their investments, based on their unique needs.

Bobby considers this as an interesting time for dividend-earning companies, given right now these are unique circumstances due to COVID-19. During non-recessionary periods, Bobby says dividend cuts hint that a company’s financial health is potentially deteriorating and may possibly underperform in the future. However, during a time like this, Bobby believes dividend cuts may indicate executives are managing their cash flows to continue operations during this economic uncertainty. Bobby reminds investors of the financial crisis in 2008, where some of the top performing companies in the recovery were those who cut their dividends during the recession. He alludes to the importance of diversification, which is an asset of Fidelity’s suite of dividend factor ETFs.

Recorded on May 1, 2020