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Fidelity Strategic Disciplines


Our Latest Thinking on the Market and Your Fidelity® U.S. Large Cap Equity Strategy*

By Barry Golden, Portfolio Manager, Strategic Advisers LLC — March 31, 2020

Key Takeaways

  • The coronavirus outbreak has led to uncertainty and driven stock market volatility, particularly within economically sensitive parts of the market.
  • The portfolio managers behind this strategy are adhering to their process and seeking out opportunities in these volatile markets to invest in companies that they believe could deliver strong returns for long-term investors.
  • While market volatility can be unsettling, market recoveries can be strong and come unexpectedly.

A challenging health situation that is also affecting U.S. stocks

Diversification across large cap styles (value, core & growth) may help to provide stability and capital appreciation over the long term

Uncertainty around the economic impact of the coronavirus outbreak has led to significant stock market volatility. Year-to-date, growth stocks have performed better than core stocks, while value stocks have lagged the most. Looking more closely within stocks, economically sensitive parts of the market have seen some of the biggest swings. This includes companies in the energy, financials, and industrials sectors. Technology stocks have performed better in this environment, as have defensive stocks, such as those found in the utilities or consumer staples sectors.

What we are doing for you

The Fidelity® U.S. Large Cap Equity Strategy seeks capital appreciation and to outperform the S&P 500® Index over a full market cycle.

Despite unexpected market volatility due to the virus outbreak, the strategy has only modestly trailed performance of the S&P 500® Index year-to-date (pre-tax, net of fees). Yet volatile markets have also provided more opportunities to seek out investments at attractive prices. These could provide strong returns in the long-term. For example:

  • Restaurant brands with low levels of debt and solid business models could rebound once the virus outbreak is contained.
  • Among other hard-hit parts of the market, industrial goods companies that have strong brands and market share could thrive in an eventual economic recovery.

On the other hand, within technology stocks, companies dependent on advertising revenue may be less attractive for some time.

We are here for you

For investors in taxable accounts:

  • We are actively looking for opportunities to tax-loss harvest1 positions, as this may help to provide tax savings in the future.
  • We seek to replace positions that we sell with holdings of a similar risk profile.
  • This helps us keep client accounts aligned to their long-term strategy.

We understand that for many investors, recent market volatility may be unsettling. However, this strategy may help to provide stability and growth for investors over the long term, due to its diversification across large-cap styles (value, core & growth).

Looking back to previous recessions, some of the strongest market returns have often occurred when news headlines seemed the bleakest. The recovery can be swift and catch investors off-guard. Therefore, we believe that investors will be better served by sticking with their long-term investment plan.