Global trade and market dynamics: Insights from Denise Chisholm

Denise's approach to research, investing and AI

Denise plays a pivotal role within Fidelity’s quantitative research and investing (QRI) team, where she integrates quantitative, technical, and fundamental research. Her focus is on equity research, providing recommendations on sectors, industries, and sub-industries rather than individual securities. By analyzing historical patterns and probabilities within market cycles, Denise aims to guide investors in avoiding common pitfalls associated with data-driven investing and to support diversified portfolio managers in their decision-making processes.

Additionally, Denise shared insights into how AI enhances her research capabilities. AI assists her by distilling complex information into clearer, more succinct points, improving efficiency and communication with advisors and analysts. It aids her in generating multiple options for presenting ideas, making her writing more deliberate and accessible across various investment disciplines.

Market momentum and investor behavior

Recent market momentum has been characterised by significant retail investor buying over the past 16 weeks, contrasted with steadier institutional activity. She highlighted that rare market moves such as a 25% rise over 14 to 16 weeks historically signal positive risk-reward opportunities. The pattern indicates that stocks may sometimes be used as indicators of future market direction.

Understanding the VIX as a Market Signal

A high VIX, which indicates market fear, often precedes higher equity returns over the following 12 months. The VIX acts as a contrarian indicator where elevated levels suggest the market has priced in bad news and that incremental buying typically follows. Conversely, low VIX levels correspond with complacency and secular bull market conditions. The market cycles between fear and complacency, underpinning the ongoing secular bull market.

Tariffs and economic impact

Tariffs have largely been priced into the market despite recent gains. She explained that tariffs function like a tax, with uncertain absorption across consumers, producers and corporate profits. The estimated $500 billion impact is split between U.S. consumers and corporate America but is not sufficient alone to trigger a recession. Other factors such as energy prices act as counterbalancing tailwinds. Earnings growth expectations have adjusted, and market pricing indicates a positive outlook for future performance.

Conclusion