1. U.S. stocks appear attractive.
Despite the recent market decline, stocks continue to trade near all-time highs with the U.S. economy looking healthy. Consumer and investor confidence have risen dramatically in recent quarters, bolstered by higher home prices, a steadily improving jobs picture, and a rallying stock market. Still, rising interest rates could threaten that growth going forward.
2. Housing, energy, manufacturing underpin U.S. economy.
The housing market continues to show signs of improvement as prices have increased dramatically over the past several years. U.S. energy production is another source of potential long-term growth. And, while manufacturing has eased somewhat from its stronger pace in previous years, it is contributing to the moderate pace of domestic economic expansion. Investments to consider in these corners of the market may include home building, real estate investment trusts (REITs), gas processors, and pipelines, among others.
3. Follow the interest rates.
Bond prices have been under pressure lately, as interest rates have risen. There are many strategies to consider in a rising rate environment, including short-duration bonds, floating rate loans, and companies able to grow their dividends. Also, if rates rise and stocks maintain their momentum, that could be a very good sign for the stock market. The financial sector—banks in particular—may benefit from rising rates, whereas companies with large amounts of debt could experience higher borrowing costs.
4. Europe and Japan find firmer footing.
After a long period of underperformance, the developed world appears to be taking the lead as emerging markets falter. The U.S. comeback seems to be clear, but now, Europe and Japan may warrant a second look. Europe could be showing signs of an early cyclical recovery, including pent-up demand similar to what the U.S. experienced in the first half of 2009. Meanwhile, Japan’s GDP has accelerated due to the positive impact that fiscal and monetary policy have had on consumer and corporate sentiment.
5. Emerging markets soften some commodities.
Is the so-called “supercycle” over for commodities? Some experts believe so, pointing to a potential slowdown in China, and urging caution on commodities. Gold, for instance, plummeted earlier this year. Declining demand from several emerging markets, such as India, may be contributing to the recent weakness in metals and other commodities. Alternatively, oil is trading at high levels—well above $100 per barrel as of mid-August. There is a strong possibility that oil prices could remain in a narrow trading range. However, if energy costs were to come down as U.S. oil and natural gas production continues to ramp up, a range of businesses would have the potential to realize improved profit margins—including consumer staples manufacturers.
Before investing in any mutual fund or exchange traded fund, you should consider its investment objective, risks, charges and expenses. Contact Fidelity for a prospectus, offering circular, or, if available, a summary prospectus containing this information. Read it carefully.
Stock markets, especially foreign markets, are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments.
Foreign markets can be more volatile than U.S. markets due to increased risks of adverse issuer, political, market, or economic developments, all of which are magnified in emerging markets. These risks are particularly significant for investments that focus on a single country or region.
Past performance is no guarantee of future results.
1.Fidelity Portfolio Advisory Service® is a service of Strategic Advisers, Inc., a registered investment adviser and a Fidelity Investments company. This service provides discretionary money management for a fee.
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 risk, liquidity risk, call risk, and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so holding them until maturity to avoid losses caused by price volatility is not possible.
Floating-rate loans generally are subject to restrictions on resale, and they sometimes trade infrequently in the secondary market. As a result, they may be more difficult to value, buy, or sell. A floating-rate loan might not be fully collateralized, which may cause it to decline significantly in value.
As with all your investments, you must make your own determination as to 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 these investments by making them available to you.
Illiquidity is an inherent risk associated with investing in real estate and REITs. There is no guarantee that the issuer of a REIT will maintain the secondary market for its shares, and redemptions may be at a price that is more or less than the original price paid. Changes in real estate values or economic downturns can have a significant negative effect on issuers in the real estate industry.
The gold industry can be significantly affected by international monetary and political developments such as currency devaluations or revaluations, central bank movements, economic and social conditions within a country, trade imbalances, or trade or currency restrictions between countries. Fluctuations in the price of gold and precious metals often dramatically affect the profitability of companies in the gold and precious metals sector. Changes in the political or economic climate, especially in gold-producing countries such as South Africa and the former Soviet Union, may have a direct impact on the price of gold worldwide.
The commodities industry can be significantly affected by commodity prices, world events, import controls, worldwide competition, government regulations, and economic conditions.
Exchange-traded products (ETPs) are subject to market volatility and the risks of their underlying securities, which may include the risks associated with investing in smaller companies, foreign securities, commodities, and fixed income investments. Foreign securities are subject to interest rate, currency-exchange rate, economic, and political risk, all of which are magnified in emerging markets. ETPs that target a small universe of securities, such as a specific region or market sector, are generally subject to greater market volatility as well as to the specific risks associated with that sector, region, or other focus. ETPs that use derivatives, leverage, or complex investment strategies are subject to additional risks. The return of an index ETP is usually different from that of the index it tracks because of fees, expenses, and tracking error. An ETP may trade at a premium or discount to its net asset value (NAV) (or indicative value in the case of exchange-traded notes). Each ETP has a unique risk profile that is detailed in its prospectus, offering circular, or similar material, which should be considered carefully when making investment decisions.
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