Ready, set, prepare for inflation

Inflation presents investment challenges as well as possible opportunities, says John Roth.

  • Facebook.
  • Twitter.
  • LinkedIn.
  • Print

The 2021 uptick in the price of consumer goods and services has many investors wary about inflation—a backdrop that Fidelity’s John Roth believes presents both challenges and opportunities.

“I can’t say if inflation is here to stay, but a protracted period of rising prices implies that long-term interest rates will continue to increase, so I’ve prepared for this possibility in the way I’ve positioned the portfolio,” says Roth who manages Fidelity® New Millennium Fund (FMILX).

The main challenge, according to Roth, is that inflation could place downward pressure on high-multiple growth stocks if investors worry that rising costs could dent their earnings power.

Although prices for growth stocks remain historically high, Roth is watching valuations closely. He believes an uptick in inflation could create attractive entry points for certain growth-oriented investments.

“In fact, I have a short list of stocks I’d like to own at the right prices,” he points out.

Roth also is focused on three other key areas of the market that could benefit from rising prices for goods and services: namely the financials, energy, and materials sectors. He notes each tends to pass on rising costs to customers fairly easily.

Financials represented the fund's biggest sector overweighting versus the benchmark S&P 500® index as of September 30, and its holdings are mainly split between regional banks and insurance firms—two industries that generally benefit from rising rates.

Within energy, John remains partial to companies exposed to the liquid natural gas chain, among them longtime holding Cheniere Energy (LNG).

“In materials, we’ve owned gold stocks such as Novagold Resources (NG) and Franco Nevada (FNV), as gold is a traditional inflation hedge, but I’m also bullish on mining firms, where supply dynamics look attractive,” Roth says.

For specific fund information, including full holdings, please click on the fund trading symbol above.

Next steps to consider



Research mutual funds


Get fund picks from Fidelity or independent experts.



Explore our fund offerings


See the range of available Fidelity Funds and learn the benefits of each asset class.



More from our portfolio managers


A collection of current insights from our portfolio managers.

  • Facebook.
  • Twitter.
  • LinkedIn.
  • Print
Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.
Investing involves risk, including risk of loss.
Diversification does not ensure a profit or guarantee against loss.
Sector funds can be more volatile because of their narrow concentration in a specific industry. Growth stocks can perform differently from other types of stocks and the market as a whole and can be more volatile than other types of stocks. Value stocks can perform differently than other types of stocks and can continue to be undervalued by the market for long periods of time. • Stock markets, especially foreign markets, are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments. • Foreign securities are subject to interest rate, currency exchange rate, economic, and political risks, all of which are magnified in emerging markets. • In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation, credit, and default risks for both issuers and counterparties. • Lower-quality bonds can be more volatile and have greater risk of default than higher-quality bonds. • The municipal market is volatile and can be significantly affected by adverse tax, legislative, or political changes, and the financial condition of the issuers of municipal securities. • The securities of smaller, less well-known companies can be more volatile than those of larger companies. • The funds can invest in securities that may have a leveraging effect (such as derivatives and forward-settling securities) that may increase market exposure, magnify investment risks, and cause losses to be realized more quickly. • Leverage can magnify the impact of adverse issuer, political, regulatory, market, or economic developments on a company. In the event of bankruptcy, a company’s creditors take precedence over the company’s stockholders. Although the companies that the fund invests in may be highly leveraged, the fund itself does not use leverage as an investment strategy. Changes in real estate values or economic downturns can have a significant negative effect on issuers in the real estate industry. In the event of bankruptcy, a company’s creditors take precedence over the company’s stockholders. Third-party marks are the property of their respective owners; all other marks are the property of FMR LLC.

As with all your investments through Fidelity, you must make your own determination whether an investment in any particular security or securities is consistent with your investment objectives, risk tolerance, financial situation, and evaluation of the security. Fidelity is not recommending or endorsing this investment by making it available to its customers.

Past performance is no guarantee of future results.

Views expressed are as of the date indicated, based on the information available at that time, and may change based on market or other conditions. Unless otherwise noted, the opinions provided are those of the speaker or author and not necessarily those of Fidelity Investments or its affiliates. Fidelity does not assume any duty to update any of the information.

Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917

935097.51.0
close
Please enter a valid e-mail address
Please enter a valid e-mail address
Important legal information about the e-mail you will be sending. By using this service, you agree to input your real e-mail address and only send it to people you know. It is a violation of law in some jurisdictions to falsely identify yourself in an e-mail. All information you provide will be used by Fidelity solely for the purpose of sending the e-mail on your behalf.The subject line of the e-mail you send will be "Fidelity.com: "

Your e-mail has been sent.
close

Your e-mail has been sent.