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The case for stocks

No matter what the short term brings, stocks may offer long-term growth potential.

Video report: Why equities

Fidelity portfolio managers weigh in on the stock rally, the strategic case for equities, and where they are finding opportunities. Watch the videos.

The dramatic rise in the S&P 500® Index since its March 2009 low—and recent pullbacks—have some investors considering taking money out of stocks. Others who bailed or trimmed their holdings after the last downturn may be wondering if it's wise to get back in.

No one knows what will happen in the short term. But the reality is that stocks have proven their ability to provide investors with growth potential over the long term. And with rising costs and longer lives, most of us will likely need portfolio growth. So, take a minute to weigh some fundamental, technical, and strategic reasons to consider the role stocks play in your portfolio.

Valuations look reasonable

Stocks prices look reasonable and corporations look strong
  • Stocks look reasonably priced, and may be cheap compared with bonds.1
  • Earnings could grow thanks to reasonable profitability, increasing overseas revenue, prudent capital allocation, and reasonable valuations.

The U.S. economy is improving

The economic recovery seems to be accelerating
  • U.S. policy uncertainty seems to have waned.
  • Manufacturing competitiveness has been on the rise, fueled by innovation and low-cost energy.
  • The U.S. has become a leading producer of energy, leading to lower prices.
  • GDP growth could accelerate enough to continue with reduced stimulus from the Federal Reserve.

Global risks and opportunities

Global opportunities
  • Emerging markets have been experiencing another round of taper-related volatility, but developed markets look strong.
  • In Japan, the economy has accelerated, credit conditions have improved, and corporate profitability is up. A looming consumption tax could give investors anxst, but overall the outlook remains positive thanks to fiscal stimulus and a weak yen policy.
  • Europe seems to be improving as the macro risks have been reduced.
  • The U.S. remains the strongest of the developed countries.
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Stocks offer growth potential

Stocks offer growth potential
  • Historically, stocks have delivered larger returns than bonds or cash.
  • Stocks have done better outpacing inflation than most bonds.2
  • Still leery of stocks? The all-too-human bias to avoid loss can undermine your portfolio’s ability to grow.

Stock ideas to explore

Where to look for opportunities
  • Corporate cash could go to work as dividends, share buybacks, or acquisitions, potentially driving total returns even if growth is slow.
  • Financials and consumer discretionary stocks have led the rally.
  • Innovations in energy, smartphones, information technology are creating opportunities.

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.

Past performance is no guarantee of future results.

1. As of March 31, 2013, the S&P 500® Index had a P/E ratio of 16.1, the third quintile of P/E ratios historically from 1926 through 2013. Source: Standard & Poor’s, Robert Schiller, Fidelity Investments (AART) through 3/31/13.
2. From 1970 to 1980, a period of high and rising inflation and yields, bonds delivered an average real return of -1.1% while stocks produced a positive average return of 0.2%. Stocks represented by the total return of the S&P 500® Index, and bonds by the Barclays Aggregate Index from 1976 to 1980 and by a composite of the IA SBBI Intermediate-Term Government Bond Index (67%) and the IA SBBI Long-Term Corporate Bond Index (33%) before that. Source: Robert Schiller, Morningstar EnCorr, Fidelity Investments (AART) as of March 31, 2013.
Indexes are unmanaged. It is not possible to invest directly in an index.
The S&P 500® Index is an unmanaged, market capitalization–weighted index of common stocks and a registered service mark of The McGraw-Hill Companies, Inc., and has been licensed for use by Fidelity Distributors Corporation and its affiliates.
Stock markets, especially foreign markets are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments. These risks are particularly significant for investments that focus on a single country or region.

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

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