Global shifts and portfolio strategy: Insights from Jurrien Timmer
On May 12, Fidelity’s Director of Global Macro Jurrien Timmer, shared his insights on the evolving macroeconomic landscape, market sentiment and long-term portfolio positioning.
Here are some of the key points from his commentary.
Trade pause offers temporary relief
A 90-day pause in U.S.-China tariffs has helped ease market concerns. Tariffs that had reached 145% have been reduced to 30%, signalling a step back from recent tensions. While this development doesn’t resolve broader trade issues, it has contributed to a more constructive tone in equity markets.
Fiscal policy takes the spotlight
With the Federal Reserve facing constraints due to inflation, fiscal policy has taken on a more prominent role in supporting market sentiment. The idea of a “fiscal put” where government actions help stabilize conditions—has gained traction. This shift reflects a broader recognition that policy decisions outside of central banks can also influence investor confidence.
Earnings remain resilient, but cautious
Corporate earnings for Q1 2025 were stronger than expected. However, forward estimates for the rest of the year are being revised modestly lower. This pattern is not unusual as companies often guide expectations conservatively. So far, the revisions suggest a slowdown, not a downturn. Markets appear to be adjusting to this softer outlook without pricing in a full recession.
International equities show renewed potential
Non-U.S. equities have underperformed for much of the past decade, but that trend may be shifting. Earnings growth outside the U.S. is beginning to pick up, while U.S. estimates are softening. Valuations remain more attractive in many international markets. If this divergence continues, it may warrant a consideration of global diversification in portfolios.
Revisiting the 60/40 portfolio model
The traditional 60/40 portfolio (60% equities, 40% bonds) has come under scrutiny. Rising interest rates have altered the historical relationship between stocks and bonds, reducing the diversification benefits of fixed income. Some investors are exploring a more flexible approach, such as a 60/20/20 model that includes alternatives like cash, gold, commodities and market-neutral strategies.
Gold and bitcoin as diversifiers
Gold and bitcoin continue to attract attention as potential diversifiers. While both are considered stores of value, they behave differently. Gold has historically shown low or negative correlation with equities and bonds. Bitcoin, on the other hand, can alternate between acting like a risk asset and a hedge.
Conclusion
Today’s market environment calls for thoughtful positioning. While risks remain, recent developments suggest a more balanced outlook. Trade tensions have eased slightly, earnings remain stable, and international markets are showing signs of strength. At the same time, evolving correlations and interest rate dynamics are prompting a reassessment of traditional portfolio structures. For advisors and investors alike, staying flexible and informed will be key to navigating the next phase of the cycle.
