Navigating market resilience amid tariff uncertainty: Insights from Andrew Marchese
On September 3, Fidelity’s Portfolio Manager and Chief Investment Officer Andrew Marchese, shared his insights on market resilience in the face of tariff shocks, evolving investment dynamics and the transformative impact of artificial intelligence.
Here are some of the key points from his commentary.
Steady earnings despite tariff shocks
Despite significant tariff shocks this year, global company earnings have remained resilient. Initial forecasts for S&P 500 earnings growth started at about 12% but were revised down to around 9% following tariff announcements and delays. This adjustment aligns with historical patterns where early optimism moderates over time. Since the market bottom in April, the U.S. market, especially large-cap growth stocks within the MAG7 group, has led the recovery, supported by fiscal stimulus and expectations of lower interest rates.
Interest rates, liquidity and financial engineering
The Federal Reserve’s dovish stance since April, signaling potential interest rate cuts, has fueled market optimism. Years of incremental capital injections, including quantitative easing and COVID-era stimulus, have created abundant liquidity, encouraging risk-taking and asset price growth. The financial industry has evolved with increased use of ETFs, factor-based investing and smart beta strategies, moving away from traditional stock picking toward engineered investment approaches. These innovations aim to provide exposure to market factors and sectors, with the potential to enhance diversification and risk management.
Artificial intelligence: a transformative market tailwind
Artificial intelligence (AI) stands out as a major driver of future economic growth and productivity. Andrew emphasized AI’s potential to transform industries, particularly white-collar sectors like healthcare. Investment opportunities include AI-focused securities and diversified baskets leveraging AI technologies. While the full impact of AI remains uncertain and market expectations may be high, a balanced approach incorporating diversified AI exposure can capture growth potential while managing volatility.
Canadian market outlook and productivity challenges
Addressing the Canadian market, Andrew noted structural productivity challenges such as taxation, brain drain and policy issues that have affected economic growth prospects. Although technology adoption continues, these factors need to be addressed to improve competitiveness. The Canadian equity market is managing trade agreement reviews and economic uncertainties, with banking and credit sectors showing resilience.
Commodity and interest rate dynamics
Commodity prices, particularly oil, have remained subdued despite supply factors, limiting bullish momentum. Lower crude prices could stimulate economic activity if supported by fiscal and monetary stimulus. Interest rate trends, including the yield curve shape and potential Federal Reserve actions, remain important for fixed income investors and those tracking inflation expectations. These factors influence asset valuations and portfolio strategies, underscoring the need for active monitoring of macroeconomic indicators and central bank policies.
Conclusion: strategic adaptation in a complex market
The insights underscore a market environment that remains resilient amid uncertainty, driven by steady earnings, accommodative monetary policy, technological innovation and evolving investment strategies. Staying informed on Canadian market factors and commodity trends will help manage regional and global risks effectively.
