FidelityConnects

Today on the program, we welcome Portfolio Manager David Tulk back to the show. David and the Global Asset Allocation team manage many funds for Canadian Investors including $80B in assets across more than 20 funds. David comments on our current market environment, how the team is dealing with rising inflation rates, and what he sees the Bank of Canada doing for the rest of 2023. Although the Bank of Canada paused its tightening agenda from its last rate announcement, Statistics Canada’s August report on inflation showed a rise to 4% year over year. That is up from 3.3% year over year back in July. David’s initial reaction to rising inflation – he believes “we’re going the wrong way.” But that’s the type of landscape we’re dealing with, he adds. Going through the inflation stats, we can see there’s some wage growth and service level inflation, which all contributes to the underlying price pressure. Also gasoline is one of the biggest factors that pushed headline inflation higher. So are rising oil prices on a global basis good for the Canadian economy or to the central banks? He says it doesn’t change the trajectory of spending, but changes the composition and this is still a concern from the central bank’s perspective. David says the banks want the economy to slow down, but for Inflation to cool off, we need a period of economic weakness, mostly in the labor market. However, that part of the economy has yet to show any weakness at all. Companies are holding on to their labor due to the pandemic and are looking to keep labor instead of rehiring months into the future. For the GAA team, they are still leading defensively in all the funds managed. They have taken more neutral equity betas and are much closer to benchmark on equity allocation. In terms of currency, they use an underweight to the Canadian dollar to enhance the defensiveness of a portfolio. The team is hedging underweight Canadian equities and overweight to global energy.

For the second year in a row, FidelityConnects by Fidelity Investments Canada was ranked the #1 podcast by Canadian financial advisors in the 2022 Environics’ Advisor Digital Experience Study.

Joining us on the podcast today is Denise Chisholm, Director of Quantitative Market Strategy. She tells us what factors and market sectors she’s keeping an eye on. Denise takes us through the indicators investors should be paying attention to. She highlights the importance of sentiment indications, such as those provided by the NFIB or the National Federation of Independent Association, considered the “voice of small business owners.” She notes sentiment indicators can be essential tools for understanding the state of small businesses and, by extension, the broader economy. And what sets sentiment indicators apart is their ability to offer real-time insights. Unlike government data, which typically lags. Denise also discusses the consideration between a value trade and value investing. She says where it becomes particularly relevant is in sectors like consumer staples. She says to be aware that valuation hasn't consistently delivered safety or prevented losses over time. So, relying solely on valuation may not be a reliable strategy. In terms of offensive sectors or defensive play, Denise suggests sectors like discretionary, Technology, and Industrials. These sectors exhibit historical cyclicality and varying risk-reward profiles, making them key considerations in offensive strategies.

For the second year in a row, FidelityConnects by Fidelity Investments Canada was ranked the #1 podcast by Canadian financial advisors in the 2022 Environics’ Advisor Digital Experience Study.

Today on the show, we welcome Equity research analyst Thomas Goldthorpe. He discusses market trends and shares his perspectives on the Canadian energy landscape. Thomas reflects on the ups and downs of the oil market since the beginning of 2023. He says the energy sector underperformed in the first half of the year, which was on the back of weaker prices. In the summer, oil prices cooled off and energy stocks underperformed. But, he adds, with a rebound in oil prices from that period plus overall inflation sentiment, we’ll see stocks perform better. Thomas comments on the Canadian and American energy markets and what they are grappling with as of late. He notes the US had robust growth year-over-year, but it is set to decline plus inventory issues are popping up creating some issues. Thomas says the Canadian oil market side is fairing very well, with a healthy growth outlook and marginal acceleration with stronger prices. Thomas discussed how OPEC and the Saudi government are taking proactive steps instead of reactive ones in terms of oil cuts. For OPEC, cutting earlier in the cycle when projected weakness is coming instead of after weakness happens has been a significant move. The Saudi government is trying to be more commercial and try to reach the highest oil prices possible for its kingdom. Thomas notes we will see rolling demand for oil, yet OPEC cuts are at recessionary levels to help balance the market.

For the second year in a row, FidelityConnects by Fidelity Investments Canada was ranked the #1 podcast by Canadian financial advisors in the 2022 Environics’ Advisor Digital Experience Study.

Today we welcome Imran Ahmad, a cybersecurity expert, lawyer and University of Toronto professor. Imran shares the latest developments in artificial intelligence and the cybersecurity space. According to recent reports by Bloomberg Intelligence, generative AI is poised to become a $1.3 trillion market by 2032. Imran says there’s alot of noise in the AI market especially since the launch of ChatGPT in November of 2022. Since then, companies have increased their investments in AI because their competitive future depends on it. But Imran notes the real value of AI is on the proprietary technology that is going to use data sets unique to clients. Without the right data set, you may not get a good outcome. He adds the three main types of investment in AI are: generative AI which is consumer-friendly, transformative AI which is a little more difficult to use and thirdly, joint investments which translates into collaborating to create a better tool. Imran says the best practices to keep data safe is creating less extensive accounts, being mindful of what you share with others, keeping your digital footprint short and doing your due diligence when buying AI products.

For the second year in a row, FidelityConnects by Fidelity Investments Canada was ranked the #1 podcast by Canadian financial advisors in the 2022 Environics’ Advisor Digital Experience Study.

Today on the program, we welcome back portfolio manager Jeff Moore as he discusses the state of fixed income for the rest of 2023. Inflation is rising, and so is consumer spending. The latest CPI, PPI, and retail data out of the US all rose, largely from a big jump in energy prices. The recent figures indicate that consumers will continue to hold up well despite rising prices and increasing levels of credit card debt. What might this mean for the Fed, and for you?  Jeff and host Pamela Ritchie delve into the Fed's strategy, the health of corporations, and the high yield market. Jeff reinforces the bond market's view that inflation is under control. He also expresses optimism about treasuries, citing positive real rates. He discusses the importance of flexibility in fixed income allocation and highlights the defensive nature of a successful fixed income portfolio during these times.  Jeff also touches on factors like energy, fiscal policies, and global demographics. He sees North America as a more favorable investment space and provides insights into his duration strategy, talking us through potential scenarios and market reactions.

For the second year in a row, FidelityConnects by Fidelity Investments Canada was ranked the #1 podcast by Canadian financial advisors in the 2022 Environics’ Advisor Digital Experience Study.

Today we dive into a discussion of the Canadian equity markets and get an update on Fidelity’s True North® Fund with portfolio manager Max Lemieux.  Fidelity True North® Fund, is a Canadian equity fund that seeks to invest in companies that are expected to grow over the long term and that are trading at reasonable valuations.  Despite a volatile week for the TSX composite, Max emphasizes that the Canadian market is an interesting play right now and it’s more than just banks per se that are appealing. He says there are energy companies that look interesting and there is diversity from food to technology.  Max reiterates that he buys stocks gradually based on his conviction or milestones that the company reaches. He notes not all companies will hit their bottom at the same time. He says some industrial companies last October and November were very close to their bottoms. Then they had an upside of 50 to 100 percent. He notes it should pay off to be patient in the long-run. He adds Canada has many corporations that are well run with quality names and good balance sheets. He also notes the True North® Fund seeks to take advantage of changes in the economy and that he is very careful about valuation.  Max also discusses recession probabilities, and housing in Canada and the US, among other topics.

For the second year in a row, FidelityConnects by Fidelity Investments Canada was ranked the #1 podcast by Canadian financial advisors in the 2022 Environics’ Advisor Digital Experience Study.

Transcript available: https://www.fidelity.ca/content/dam/fidelity/en/documents/transcripts/transcript-podcast-fidelityconnects-lemieux-sept20.pdf

On the program today is Fidelity’s Vice President of Tax Research Peter Bowen and host Kelly Roberts, Vice President of National Accounts for a deep dive into how the Alternative Minimum Tax works and the changes you can expect. Earlier this year, the Federal 2023 budget announced significant changes to the Alternative Minimum Tax system. The changes apply to certain areas like inclusion rate on capital gains, and stock options. So how will this affect investors? And what should advisors keep in mind when informing their clients of these changes? Peter says changes to the Alternative Minimum Tax or AMT doesn’t come into effect until next year. Some key highlights - the tax rate on newly calculated tax base (for AMT) is going up from 15% to 20.5%. This is federal rate, provincial rates are layered on top. Peter says the good news is the exemption is increasing from $40 000 to $173 000 – this is the deductible amount before calculating tax burden based on increased rate. He adds 80% of capital gains is included in calculation, next year will be 100%. In terms of advisor planning for the changes to the AMT, Peter says is less of providing tax advice but helping clients be aware of changes and suggesting the right strategies. Changes don’t come into effect until next year, so if your client is looking to sell something with significant capital gains, could be done before year end. And they are planning on using capital loss this year, maybe delay that as in future years will only be able to use 50% of that.

Recorded on September 14, 2023.

At Fidelity, our mission is to build a better future for Canadian investors and help them stay ahead. We offer investors and institutions a range of innovative and trusted investment portfolios to help them reach their financial and life goals. Fidelity mutual funds and ETFs are available by working with a financial advisor or through an online brokerage account. Visit fidelity.ca/howtobuy for more information.

For the second year in a row, FidelityConnects by Fidelity Investments Canada was ranked the #1 podcast by Canadian financial advisors in the 2022 Environics’ Advisor Digital Experience Study.

Today on the program, we welcome back director of ETFs Andrei Bruno. Andrei gives us an overview of the capital market playbook for the rest of 2023. Some key highlights he points out is If the Fed continues to raise rates while the Bank of Canada is still on hold and we continue to see a widening in interest rate differentials, U.S. is our number one trading partner so we may import more inflation from that FX mechanism. Andrei’s financial background is in capital markets and the FX desk. He says he’s focused on cracks in credit market. He notes we will see those before equity markets moves. So far we haven’t seen any this yea. Andrei says the majority of maturities are in 2025 and distressed debt levels and default rates are within historical averages. He states fixed income flows are still the main story for ETFs. And he adds duration is a strong recommendation for soft or hard landing scenario with decent yield and lower reinvestment risk. Andrei remains cautious. He suggests analyzing whole portfolio for tilts to a particular risk, asset class or investment style. Quality is recommended for a recessionary environment. Earnings will have to grow into valuations for tech to continue to rally.

At Fidelity, our mission is to build a better future for Canadian investors and help them stay ahead. We offer investors and institutions a range of innovative and trusted investment portfolios to help them reach their financial and life goals. Fidelity mutual funds and ETFs are available by working with a financial advisor or through an online brokerage account. Visit fidelity.ca/howtobuy for more information.

For the second year in a row, FidelityConnects by Fidelity Investments Canada was ranked the #1 podcast by Canadian financial advisors in the 2022 Environics’ Advisor Digital Experience Study.

Today we welcome Fidelity Portfolio Manager Sri Tella who provides us with his outlook on Canada's bond markets and the indicators to watch for as we head into the fourth quarter of 2023. Following two consecutive rate hikes, the bank of Canada has kept its key interest rate steady at 5%. How are higher interest rates affecting today's fixed income landscape? And which factors are delaying the impact of rate hikes. Sri notes that while inflation remains a concern, signs of economic slowing are emerging, giving the bank of Canada room to observe and evaluate data before making further decisions. Sri and host Pamela Ritchie also discuss the resilience of the Canadian economy, the complexities of the fixed income landscape amid higher interest rates, and the factors delaying the full impact of rate hikes. Sri suggests that the economy's robust performance is partially due to fiscal spending, built-up savings, and pent-up demand. The interview also covers the potential effects of rate hikes on mortgages, consumer spending, and the broader economy. He emphasizes the importance of being cautious in the current market environment, as investors might become complacent amid the ongoing positive economic trends.

Recorded on September 7, 2023.

At Fidelity, our mission is to build a better future for Canadian investors and help them stay ahead. We offer investors and institutions a range of innovative and trusted investment portfolios to help them reach their financial and life goals. Fidelity mutual funds and ETFs are available by working with a financial advisor or through an online brokerage account. Visit fidelity.ca/howtobuy for more information.

For the second year in a row, FidelityConnects by Fidelity Investments Canada was ranked the #1 podcast by Canadian financial advisors in the 2022 Environics’ Advisor Digital Experience Study.

Today we welcome back Fidelity Director of Quantitative Market Strategy Denise Chisholm. Denise discusses the correlation between oil prices and equity markets, rising rates and what it means for the US and the Canadian economies, and what top sectors she has in mind. Denise explains what would cause a shock in oil prices in consumers. She says when she thinks of shock its historically has historically needed to be that big and quick to take the consumer down. She points out in 2008 the consumer didn’t collapse on itself until the shock came from the Fed and oil prices. And she adds in this cycle and in most cycles it takes a long time for interest rates to provide a shock to debt service. Plus in the US mortgage debt is locked in at 3 per cent whereas in Canada that mortgage debt is mainly at variable rate. Denise also touches on rising rates and the impact on the economy. She says it’s not important that the rates are rising, it’s the why behind higher rates and higher oil prices. Rising rates are a bad thing when you also have falling growth in the economy but GDP remains steady with an acceleration in real growth GDP. She adds growth in GDP is more important than interest rates as it relates to the equity markets. The question becomes, “How fast can your economy grow without a problem?” In some ways the US has been able to grow a little bit faster without a problem relative to Europe.

At Fidelity, our mission is to build a better future for Canadian investors and help them stay ahead. We offer investors and institutions a range of innovative and trusted investment portfolios to help them reach their financial and life goals. Fidelity mutual funds and ETFs are available by working with a financial advisor or through an online brokerage account. Visit fidelity.ca/howtobuy for more information.

For the second year in a row, FidelityConnects by Fidelity Investments Canada was ranked the #1 podcast by Canadian financial advisors in the 2022 Environics’ Advisor Digital Experience Study.