FidelityConnects: Kick off 2026: ETF trends and opportunities

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Hello, happy Friday and welcome to Fidelity Connects.

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I'm Pamela Ritchie.

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ETF flows continue to tell a powerful story.

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They have been outselling mutual funds and investors are

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making some very intentional choices about where they

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want exposure.

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How are investors thinking about the landscape as 2026

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unfolds here? It's been a wild 2026 already.

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We'll dig into it in the context of ETFs.

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Ultimately, which factors is our next guest looking to

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for clarity? To take a look at how to invest with

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ETFs happy to say that joining us here today to discuss the

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top ETF trends and strategies shaping the start of

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the year is ETF strategist, Vince Kraljevic.

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Vince, Happy New Year.

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Great to see you.

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Happy New Year. Thanks for having me.

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I think we can still say this but maybe this

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is the end.

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We'll have to make this the end. Welcome everyone to sending

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their questions in for Vince over the next half hour or so.

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Let's talk about, I mean, blockbuster is just

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not a big enough term.

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What kind of term do we call the last year

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and continuing of flows for ETFs?

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I would just say record-breaking.

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I'm pretty sure I can say record-breaking in front of

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everything and it would be true.

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I was here probably October of

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last year and we just approached 75

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billion, 80 billion. I don't think the number was public but

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I said I think we broke the last year record.

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In 2024 it was 75 billion of

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flows into ETFs and that was record last year.

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Last year...

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So you hit it in October before you even got [crosstalk].

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We had an entire quarter of fingers

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crossed that we didn't go into redemptions or something

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happens. I didn't want to say we would break the record but

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we were on pace to break the record.

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In 2025

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$125 billion into ETFs so record-breaking year.

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In that one quarter

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60%  higher than the prior year, record flows into equities,

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record flows into fixed income, record launches, record

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... I could literally say record in front of everything and

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it would probably be true. It was just a phenomenal year for

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the ETF industry in general and then here at Fidelity, again,

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record-breaking year for our ETF sales.

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It was the first time where mutual funds and ETF,

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CTF funds kind of sold 50/50, so it was an equal weighting

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between the two options, and we captured

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about 15 cents on every dollar that went into an ETF.

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I think the first time I was on the show I said we broke the

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top 10. We are now the fifth largest manufacturer in Canada.

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By the end of the year we should be fourth, maybe before

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we'll be the fourth largest manufacturer in Canada, and we

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have two ETFs in the top 10.

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Even being in the top 10 and having some great funds

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within there you're still kind of reminding investors

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that ETFs are here and they're not necessarily passive, and

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what you're doing at Fidelity is not passive.

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That's the whole point of it.

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But it is kicked into the heap of

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these are passive instruments.

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Yes.

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But the story, why does the story warrant retelling?

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I mean, you know, I'm asking you because I asked you this

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question before.

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No, no, it's a story that needs to keep

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being told. I think before we came on air I was telling you

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about in the United States there is an episode of Jeopardy

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and they asked what does ETF stand for?

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Jeopardy, smart people.

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Smart people and not one of them could answer what an ETF

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was. There is just this constant reminder, I feel like we

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have to keep explaining the exchange-traded fund, it's a

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mutual fund that trades on exchange.

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I think the biggest thing is that when they were first

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launched over 30 years ago they were always passive.

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They tracked the TSX, they tracked the S&P 500, then

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they tracked an international index and then a fixed

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income index, so equities to fixed income, but always

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was synonymous with being passive.

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Even here in Canada, we are, hopefully, going to

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be the fourth largest ETF manufacturer in Canada.

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The three before us, predominantly all passive.

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They're infamous for being passive.

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For instance, if you bought the TSX last year it was a pretty

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good buy.

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Tell us the nuance of why we want something that's active

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when that did pretty well.

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S&P 500 the same.

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Exactly. When we first launched ETFs we launched our

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factor-based approach. It was this tactical thing.

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With regards to the factor, very quickly,

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there are anomalies that happen in the market that if you can

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systematically take advantage of you can generate

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outperformance or alpha. Each one of these factors works at

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a different time. We launched them individually and then we

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finally wrapped them together. We have our all-regional

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Canada, our all-regional United States and our all-regional

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international.

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they kind of protect on the downside.

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Okay, so this is it.

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Exactly. When the market goes down they capture about 80%

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of the downside, they capture about 95 to 97%

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of the upside.

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When you look at the risk-adjusted returns they're

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better, even for like-for-like returns.

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International, since inception the performance is better

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but with less risk. In the United States, comparable

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performance with half the weight of the Magnificent 7, in

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Canada, outperformance. It's doing what we intended to and

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exactly how we anticipated.

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It is offering that downside protection while giving you

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market-like returns. Most people want

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that protection. When the market's going up it's great

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but when the market's going down they like knowing that

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there's a bit of a buffer to protect on the downside.

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It keeps you invested longer.

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It keeps you invested longer and you don't want to bounce out

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when you see the market sort of going in a particular

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direction.

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Let's ask about the risks that are in the market for those

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that would want to make sure that they are protected to the

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downside.

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We've asked a lot of people recently what the top risks are.

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There is one that everyone seems to coalesce around but

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talk us through how taking a look at active ETFs can

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help you avoid whatever risks you see.

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What are risks that you see?

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In general, and then I think it distils down to, I think,

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what a lot of people are coming down to. I think there's just

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a lot complacency in the market.

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We're used to it going up.

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It's just been going up. You have this US administration

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that's doing a ton of things and the market's just going up.

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They're looking through it. I was telling you earlier

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I had a different role at a different firm and it was his

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first term and he would...

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This is the Trump administration 1.0.

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Trump 1.0.

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He would tweet and this is the first time that a president

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would be tweeting and it would move the markets.

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By year three he would just tweet something

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and most people would ignore it.

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The same thing happened for the US administration

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2.0 where I would

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be in Calgary and the market was down 5% because he tweeted

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something, or he put it on social media,

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and I'd get off stage and it's up 5%.

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Now, it just took a year, every

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day this year, something has happened.

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The cap on credit cards at 10%.

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The mortgage insurers are gonna purchase $200 billion.

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There's always this new thing that's coming out.

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It's 16 days old this year.

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It's just every day there's something new and

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the market's kind of looking through it. It's just this

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complacency that's happening. In the bond market the MOVE

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index, the volatility of the

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fixed income, is at its

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2021 low, four years.

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The bond market is considered institutional money or

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smart money and they're just complacent.

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Spreads are so tight.

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One part of the government is

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picking on the Fed. They're supposed to be independent.

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They're kind of treating it like an emerging market Federal

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Reserve. It's just...

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But really no particular market reaction to

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that.

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There's not a lot of volatility in the fixed income market.

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Again, the VIX is relatively low.

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It hit a low right after Christmas but then a few things

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happened that increased the VIX index. It's been

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completely risk-on. In Bloomberg I can

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look at academic definitions of

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volatility. You can take the Russell 1000 and

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you divide it up into five, you take the most volatile

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as five and the least volatile as four and if you

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take the top quintile of most volatile  it reached a point

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where it outperformed the least volatile by 25%.

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It's just risk-on until June.

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Now what we're seeing, or what I'm seeing, is that those

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risky things are rotating.

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It is converting.

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Well, I think people are looking through it that things might

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have been going too well for too long so there is that

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complacency.

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We're getting to artificial intelligence is going to save

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everything. There's a lot of people betting on this

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and it's going to increase productivity and you have to

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invest in so on and so forth. There's just this complacency

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with regards to that.

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Let me ask what you see there in terms of the risks.

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You've watched the markets for many, many years of your life

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and there are times where it's a

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boom, not necessarily a bust here, but we're in

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some version of a boom and it's good to be invested in those

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moments.

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Absolutely. Again, with regards to the American sleeve

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of our All-in-Ones, or our American regional, we do have an

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allocation. Our low vol has about, let's call

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it a 15% allocation to the Magnificent 7, and then our

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quality has almost a market weight but on average we

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almost have half the weight or 60% of the

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Magnificent 7. We do have an allocation towards them, it's

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just not the passive, their 40% or

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35% were handcuffed to it. We can make active decisions

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through our factor-based approach to rotate in and out of

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them as we see fit.

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If you look at any technological boom, the

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railroads, the dot-com,

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there typically is an overbuild. There were too many railroad

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companies, there was...

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The CapEx goes too far.

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It goes too far. With the dot-com

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they laid down a ton of fibre optics and

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by the end of it only one-third was used but now all of it's

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used so there is that overbuild but sometimes it does get

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utilized later on. I think even one of the CEOs of

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one of the Magnificent 7 companies said the risk of

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not investing--

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Is the risk.

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--is the risk. They are already kind of acknowledging that

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they have to get into it.

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One of the pieces of that is how they're funding it.

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In most cases they're well endowed to fund

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it, it's not an issue for them, but there's

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some creative finance going on.

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There's no question.

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There's definitely some creative finance with some of the

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larger companies that are doing it. They're financing it from

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cash. Some of them are actually going to private credit,

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some are creating special purpose vehicles.

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So it's off balance sheet.

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It's off balance sheet in a way.

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There's different ways of doing it.

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There's new players that are coming into it as well so you're

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getting all these private equities that are being launched to

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create data centres.

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There's this big build out ... you can call it a gold rush of

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getting into it. The issue with that is do we need the data

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centres? Possibly, but this is a very quick and dynamic

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part of the market.

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It is changing so rapidly.

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The DeepSeek moment, can you do it with cheaper processors?

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Does it need to be a great big data centre or could it be...

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Does it have to be big data centre?

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You gave a great example of something.

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You can shoot it into space so there was [crosstalk].

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There was something else about heating swimming pools and

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kind of a small data centre.

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It's like small nuclear reactors, small modular reactors.

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What if you can create a data centre that's smaller and

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it can heat a swimming pool?

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There's some countries that have it to heat swimming pools,

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they have it to heat public housing.

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These are ways but do they have to be that big?

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With regards to large language models...

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That could be great for municipalities to heat community

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housing that must be very, very expensive to do.

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Exactly. There's all these things that people are talking

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about. Will it come to fruition? We don't really know.

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This is an emerging technology and it is

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changing very quickly. There's that DeepSeek moment where

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it's like do we need to do this?

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With the large data centres, yeah, we're building them on

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earth but can you shoot it up into space?

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Space is cold so it's at absolute zero so you don't...

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It's like Canada.

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That's why they're talking about building it in northern

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Alberta.

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They certainly are. Next to the oil there's cold.

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Yeah, so just the natural gas, you just pipe it in there and

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you just leave it outside in the tundra.

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It is changing dynamically.

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It was CPUs, GPUs, TPUs.

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The technology behind this is changing so rapidly that

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you kind of have to invest in it, you kind have to be in it.

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Is there a potential for overbuild?

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Absolutely. I'm just thankful that we have Global Innovators

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in an ETF and we have Mark Schmehl

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who understands all of it. I probably understand 1%

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of what that man understands. If you are interested on

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the cutting edge of artificial intelligence it would probably

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be something that our

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FINN is an ETF that you should probably consider.

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And he takes a really big look at the energy piece of

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the AI buildout within all of that.

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<b>Hello, investors. We'll be back to the show in just a moment.</b>

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<b>else you get your podcasts. Now back to today's show.</b>

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It's fascinating. Those are some of the risks, the concerns,

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the landscape of ultimately the market that

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investors are leaning into.

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Tell us a little bit about that capturing of

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the downside, a little bit of what ETFs that are on

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offer within the suite of products can do in

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a moment where there might be some downside.

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How does it plow through?

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With regards to the four ETFs, the

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four factors that go into our All-in-Ones, you have

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value that helps in the early cycle, then you have

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momentum in the mid cycle, quality in the late cycle, and

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then low volatility in the

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recessionary cycle when things kind of go wrong.

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Trick question, what cycle are we in? Nobody seems to

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know the answer to this, actually.

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When I first got on here everyone thought I was being evasive

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because we kept saying we were in the late-late cycle and I'm

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like, I don't think we even know where we are.

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In the late cycle and at the beginning last year momentum

14:26.440 --> 14:29.600
worked, it did do that, and then last time I was on

14:29.600 --> 14:32.680
value, so that's mid-cycle, and now year-to-date

14:32.680 --> 14:33.680
small-cap has

14:36.000 --> 14:39.640
the Russell 2000 8%, the S& P is 1.5%.

14:39.640 --> 14:41.560
So small-cap in early so...

14:42.960 --> 14:43.960
It doesn't matter because you've got all of them.

14:45.800 --> 14:49.000
We're diversified. It looks like we're going backwards.

14:49.000 --> 14:51.600
But in any case you have all those factors and they're all...

14:51.600 --> 14:54.800
That's why the All-in-Ones and the regionals

14:54.800 --> 14:57.120
are so brilliant. I don't need to make a call.

14:57.160 --> 14:58.600
It doesn't matter what cycle it is.

14:58.640 --> 15:00.960
Doesn't matter. The intent is to generate market-like

15:01.000 --> 15:04.880
returns. Since inception you're getting similar returns,

15:04.920 --> 15:08.360
less downside. During the tariff incident,

15:08.400 --> 15:11.440
80% of downside. During the yen carry trade, 80% of downside,

15:11.440 --> 15:15.120
so it's offering that downside. Of course, we underperformed

15:15.160 --> 15:18.400
coming out of Liberation Day because it was just a risk-on

15:18.440 --> 15:22.000
so we got dragged down by low volatility and quality because

15:22.000 --> 15:25.040
if you're high risk and junk then

15:25.080 --> 15:27.200
we don't really capture that.

15:27.200 --> 15:28.920
Since November there has been that rotation.

15:28.920 --> 15:32.080
If we are going back to

15:32.120 --> 15:35.280
small and then we come back, from

15:35.320 --> 15:37.880
a relative strength and relative momentum it looks like low

15:37.880 --> 15:40.480
vol is actually kind of perking up so it's something I'm

15:40.520 --> 15:41.840
keeping an eye on.

15:41.840 --> 15:44.960
Does that go, I mean, it doesn't go with value in

15:44.960 --> 15:47.600
the way that coffee and biscuits go together but there's

15:47.600 --> 15:49.680
something in there that you might want to put together.

15:50.920 --> 15:54.240
Again, it's a bold call but for example,

15:54.240 --> 15:57.120
if you don't want Nvidia in your portfolio that one does not

15:57.120 --> 16:00.160
hold ... it holds 15% as

16:00.160 --> 16:02.680
opposed to 35%. If you're trying to avoid

16:04.680 --> 16:06.600
... our job as strategists is to sit down, ask you what

16:06.600 --> 16:07.600
you're trying to accomplish.

16:08.880 --> 16:11.040
If you're looking for diversification is it within the United

16:11.040 --> 16:12.680
States, what kind of diversification?

16:12.680 --> 16:14.920
Are you overweight heavy growth and you need to pair it with

16:14.920 --> 16:17.920
value or low volatility or are you looking international?

16:19.160 --> 16:22.000
We work with advisors to try figure out what you're trying to

16:22.000 --> 16:23.240
accomplish and what ETS we have.

16:23.240 --> 16:26.680
What do you find with after years and years of Canadians

16:26.680 --> 16:29.840
being probably overweight to the US

16:29.880 --> 16:30.880
because it's been an incredible ...

16:32.560 --> 16:34.520
there's been absolutely no reason not to be,

16:35.760 --> 16:38.640
what do you sort of suggest there because there's probably

16:38.640 --> 16:40.440
some tinkering needed.

16:41.760 --> 16:43.520
It's trends that we're seeing in the top 10.

16:44.680 --> 16:48.080
The first trend that I'm seeing,

16:48.080 --> 16:50.240
well, let's go with the biggest major trend that I've seen

16:50.240 --> 16:53.560
and I think it's going to be continuing into 2026,

16:53.560 --> 16:56.840
is at the beginning of this year

16:56.840 --> 16:59.960
the international markets was a top selling ETF in

16:59.960 --> 17:01.880
Canada. There was just that one moment where it blipped up

17:01.880 --> 17:04.680
and then it's trickled back down but I think that's a

17:04.680 --> 17:05.400
consistent trend that is...

17:05.400 --> 17:07.120
Do you think that's secular, actually?

17:07.160 --> 17:08.840
I think there's a few stories behind that.

17:08.840 --> 17:11.640
We're going to break it down to a long term secular like a

17:11.640 --> 17:14.640
structural and then there is a tactical play as well.

17:14.680 --> 17:17.920
From the structural, to

17:17.920 --> 17:20.080
your point, you didn't have to invest outside of the United

17:20.080 --> 17:23.040
State. You didn't need to.

17:23.080 --> 17:26.680
Listen, I was an advisor and it's hard explaining that here's

17:26.720 --> 17:29.840
this one geography that's returning 15% and then

17:29.840 --> 17:31.440
the other one returns 5.

17:31.480 --> 17:34.240
The same thing, 15, 5, 15, 5.

17:34.240 --> 17:35.680
It becomes one of those things that you're telling your client

17:35.720 --> 17:37.760
you have to increase the weighting. I've spoken with advisors

17:37.800 --> 17:39.040
that have actually just cut it out.

17:40.240 --> 17:44.160
I've spoken with some advisors that just have Canada,

17:44.160 --> 17:46.880
25, and United States, 75.

17:46.880 --> 17:49.960
If you look at the MSCI World going back to the 1980s the

17:49.960 --> 17:51.880
United States was only 30%.

17:51.880 --> 17:52.880
And now it's what?

17:54.200 --> 17:55.200
65, I always say 70.

17:56.960 --> 17:59.400
Now it's just been on this tear.

18:02.000 --> 18:03.880
If you look at the average since the personal computer was

18:03.880 --> 18:07.000
invented in the 1980s it would be 50% if you

18:07.000 --> 18:10.200
just kind of averaged it out, if things mean revert, and now

18:10.200 --> 18:12.280
you have a 0% weight.

18:12.280 --> 18:15.360
If you're just going to take a 10% weight just to get to a

18:15.360 --> 18:19.160
little bit, if you're going to just do MSCI World's 25,

18:19.160 --> 18:22.320
25, there's still a lot momentum to just go

18:22.320 --> 18:25.360
there from a a secular, structural, maybe I

18:25.360 --> 18:28.320
should put this back in my client's portfolios.

18:28.360 --> 18:30.440
I've been in the industry for a while, I have some colleagues

18:30.440 --> 18:31.560
that work in the United States.

18:34.320 --> 18:35.760
You're like, oh, what are you guys going to be selling this
year?

18:35.800 --> 18:36.800
And they're like international.

18:38.000 --> 18:39.680
Talking to somebody in the ...

18:39.680 --> 18:40.840
all they sell is US growth and US value. They just...

18:42.920 --> 18:44.800
This really is a sea change.

18:44.800 --> 18:47.000
You look at the globe and it's America and rest of world, if

18:48.280 --> 18:51.400
you want to talk about home bias. They are really talking

18:51.440 --> 18:54.800
about international and it's the first time in my

18:54.840 --> 18:57.960
experience that wholesalers from the United

18:57.960 --> 19:01.640
States are talking about it, last year in terms of flows

19:01.640 --> 19:04.760
$66 billion went into equities, half of that went into

19:04.760 --> 19:06.920
international. In the first

19:08.080 --> 19:11.520
week, I just pulled the data, $25 billion went into

19:11.520 --> 19:14.000
US equities and 60% was international.

19:15.200 --> 19:17.120
It's not only happening here in Canada, I think it's

19:17.120 --> 19:18.520
happening in the United States as well.

19:19.640 --> 19:22.200
There's been such a massive underweight for such a long time.

19:22.200 --> 19:22.760
So there's the structural and then there's...

19:22.760 --> 19:25.880
So there's the structural. Tell us

19:25.880 --> 19:29.000
the tactical because some will say, actually,

19:29.000 --> 19:31.440
you've captured a lot in Europe off the bottom

19:33.040 --> 19:34.680
and now what? What's left?

19:34.680 --> 19:35.680
I mean, that's quite a question.

19:36.720 --> 19:38.640
There was that catch-up trade.

19:38.680 --> 19:40.840
I hated saying it, oh, we're training ...

19:40.840 --> 19:43.200
the United States trading at a premium to itself historically

19:43.200 --> 19:44.320
to the rest of the world, Europe's trading in just ...

19:45.360 --> 19:48.240
there has been this catch-up trade that has happened.

19:50.840 --> 19:53.080
The one thing, if you just step back and you're going, okay,

19:53.080 --> 19:56.160
let's look at this at a factor perspective, the United

19:56.160 --> 19:59.240
States is mainly quality growth oriented, rest of the world

19:59.240 --> 20:01.320
is value oriented. If you just want to pair...

20:02.400 --> 20:03.400
So just barbell it.

20:03.400 --> 20:05.200
You just barbell it. You're like, okay, listen, this is very

20:05.200 --> 20:07.240
growthy and this is focused on technology.

20:08.400 --> 20:11.200
The Magnificent 7 make up one-third of the S&P 500.

20:11.200 --> 20:12.520
TMT makes up 40%.

20:12.520 --> 20:15.440
The AI trade is 50% of the S& P 500.

20:15.440 --> 20:18.360
Then you look at Canada and it's materials, oil, gas.

20:18.360 --> 20:21.680
You look at international markets it's materials.

20:21.680 --> 20:25.000
You can barbell it on here's my growth AI story

20:25.040 --> 20:28.160
and then here is my if that story doesn't work out.

20:28.200 --> 20:29.480
That's really interesting.

20:29.520 --> 20:31.960
What are the products ultimately that will capture that?

20:31.960 --> 20:34.640
I mean, if that's the diversification that an investor is

20:34.680 --> 20:37.600
looking for where do you go?

20:37.600 --> 20:40.640
Of course, if you're looking for a broad base,

20:40.640 --> 20:43.560
we took our All-in-Ones, and there's the three geographies

20:43.560 --> 20:46.720
and there's [FSIN?], Fidelity Canada International

20:46.720 --> 20:48.800
IN, that's just the four factors.

20:48.800 --> 20:51.640
You're not making a factor call on where you are in the

20:51.640 --> 20:53.800
business cycle. This is kind of like either a pairing with

20:53.800 --> 20:56.160
passive or you make it a core holding because you're getting

20:56.160 --> 20:58.640
a correlation of one, it's offering you that downside and

20:58.640 --> 21:00.600
kind of alpha, hopefully, in the long run.

21:00.600 --> 21:03.720
Factors, not all factors work all the time but

21:03.720 --> 21:06.760
they work over time. If you

21:06.760 --> 21:09.520
are trying to make a call  there is an international value.

21:09.520 --> 21:11.240
FCIB is our international value.

21:11.240 --> 21:14.480
The international value space, and this is that

21:14.480 --> 21:17.200
conversation about the P/E is already there, MSCI

21:18.920 --> 21:22.160
EAFE is trading at 15 times forward earnings and ours

21:22.160 --> 21:24.120
is trading at 11 so there is still

21:25.840 --> 21:28.960
value out there. Then we have a

21:28.960 --> 21:32.280
free cash flow. It's trading at a lower P/E and we're

21:32.280 --> 21:34.440
looking at are they generating cash flow?

21:34.440 --> 21:35.920
There is still that story there.

21:35.920 --> 21:39.440
If you look at the S&P in aggregate and you look at the MSCI

21:39.440 --> 21:42.840
EAFE in aggregate, yeah, maybe that trade's there but if you

21:42.840 --> 21:45.520
look underneath the hood there's still possibly some more

21:45.520 --> 21:46.760
potential there.

21:46.760 --> 21:49.120
That is fascinating. There's a question coming in that

21:49.120 --> 21:52.400
probably underpins part of the reason that Canadians

21:52.400 --> 21:56.040
and other investors might be looking to diversify but let's

21:56.040 --> 21:57.360
hit this one directly.

21:57.360 --> 22:00.560
Can you discuss how the USD is

22:00.560 --> 22:02.440
impacting your ETF outlook?

22:02.440 --> 22:06.640
Thoughts on currency hedged versus an unhedged exposure.

22:06.640 --> 22:07.440
That's a great question.

22:07.440 --> 22:09.000
This is something that you need to do for a while.

22:09.000 --> 22:11.640
I wish I was a currency trader. We do offer USD and currency

22:11.640 --> 22:14.760
neutral options for a lot of our ETFs.

22:14.760 --> 22:17.840
It's one of those things that's a very

22:17.840 --> 22:21.240
complicated question based off of macro inputs,

22:21.240 --> 22:23.000
where you think interest rates are going, interest rates

22:23.000 --> 22:26.040
vis-a-vis other countries'

22:26.040 --> 22:27.160
macro and fiscal policies.

22:29.640 --> 22:32.720
If I was going to give just a standard question, over the

22:32.720 --> 22:36.120
long run having, especially in international markets,

22:36.120 --> 22:39.040
having different currencies actually offer broader

22:39.040 --> 22:40.520
diversification and decrease overall volatility.

22:40.520 --> 22:43.800
It's just having

22:43.800 --> 22:46.360
different kinds of fixed income, equities, currencies, all

22:46.360 --> 22:48.760
working kind of lowers overall volatility.

22:48.760 --> 22:52.000
Sometimes the costs with hedging kind of erode out

22:52.000 --> 22:54.880
performance anyway. If you're going to make a tactical call

22:54.880 --> 22:58.120
you're gonna have to look through and I'd have to ...

22:58.120 --> 23:00.720
if that advisor wants to reach out to their wholesaler more

23:00.720 --> 23:03.040
than happy to sit down to start discussing on where they

23:03.040 --> 23:04.760
think interest rates are going.

23:04.760 --> 23:05.760
In Canada...

23:06.680 --> 23:07.760
We might be done in terms of the cutting cycle.

23:07.760 --> 23:10.800
We might be done but then the biggest

23:10.840 --> 23:13.920
bogey on the horizon is, okay,

23:13.960 --> 23:17.000
NAFTA, we're renegotiating, what if we

23:17.000 --> 23:20.040
decide to chuck it, which may or may not happen, I

23:20.040 --> 23:23.120
don't know, but you will have to cut rates, and

23:23.120 --> 23:26.400
that isn't priced in. If we get into a real trade war,

23:26.400 --> 23:28.720
and I'm not going to bet on that, if you want to make a bet

23:28.720 --> 23:31.240
you probably want to make a currency call on that.

23:31.240 --> 23:34.400
There's a lot of things that go into that

23:34.400 --> 23:37.520
and it's a complicated question that I would love

23:37.520 --> 23:40.360
to sit down and talk over all the scenarios that can possibly

23:40.360 --> 23:40.760
happen.

23:40.760 --> 23:42.960
No, it's a good answer because there are so many different

23:43.000 --> 23:44.680
angles to taking a look at that.

23:44.680 --> 23:47.760
Let's go back to vol and to volatility and a little bit

23:47.760 --> 23:50.400
to this sort of complacency story.

23:50.400 --> 23:54.400
There are things coming up that traditionally would

23:54.440 --> 23:56.320
rock the markets in the US.

23:56.360 --> 23:57.960
You might have thought that some of the things that have

23:57.960 --> 24:01.000
happened over the last week, two weeks, year would have

24:01.040 --> 24:03.600
as well. What about, for instance, US mid-terms?

24:03.640 --> 24:05.680
There's a lot of policy that's being made right now in the

24:05.720 --> 24:07.840
United States sort in advance of that.

24:08.960 --> 24:12.000
Does that provide volatility in a way that other things

24:12.000 --> 24:15.320
haven't? I guess you don't know but how would you advise

24:15.320 --> 24:18.160
clients to take a look at that and get ready for it?

24:18.160 --> 24:20.840
That's kind of ... when I said we're going backwards through

24:20.840 --> 24:24.320
the business cycle and the last one, going from momentum,

24:24.360 --> 24:27.640
value, size, and now I'm

24:27.640 --> 24:30.920
kind of seeing low volatility peak is,

24:30.920 --> 24:33.520
are those people taking some chips off the table?

24:33.560 --> 24:36.240
Low volatility is not a great trade right now but it seems to

24:36.280 --> 24:39.400
be. To your point, a mid-term election year

24:39.400 --> 24:42.440
hasn't been really good for the US stock market.

24:42.440 --> 24:45.520
History doesn't repeat

24:45.560 --> 24:47.520
but it sure does rhyme.

24:47.520 --> 24:49.840
Could it be one of those things that this is the thing that

24:49.840 --> 24:52.320
kind of knocks people off their complacency?

24:52.320 --> 24:55.720
Is there a fiscal cliff, a mid-term election and

24:55.720 --> 24:58.480
then you just get this confluence because you never know

24:58.480 --> 25:00.800
where that black swan event's gonna happen.

25:02.760 --> 25:04.480
Or what spooks an investor one way or the other, there could

25:04.480 --> 25:05.360
be something and we don't know.

25:05.360 --> 25:08.600
One missed earnings, one missed, you don't really know.

25:08.600 --> 25:11.720
With the AI trade and again, international,

25:11.720 --> 25:14.800
it's like US is trading at a premium relative to

25:14.800 --> 25:16.320
international because of the earnings growth.

25:16.320 --> 25:19.320
The earnings growth is coming from this AI but the AI is

25:19.320 --> 25:20.320
circularly referenced.

25:21.240 --> 25:23.600
If one doesn't give the other money and then it all starts

25:23.600 --> 25:26.200
breaking down. If you're expecting to grow at 12, quickly

25:26.200 --> 25:30.240
becomes 8, is that what kind of triggers all of this?

25:30.240 --> 25:32.960
There's a lot of these things that are underneath it.

25:32.960 --> 25:35.720
If you're priced to perfection once one thing misses...

25:37.560 --> 25:40.840
We have a few minutes left so take us back to sort of

25:40.840 --> 25:42.160
there's a fund for that.

25:42.160 --> 25:46.120
For those concerns, for those worries, for those

25:46.120 --> 25:48.920
who just want to continue on in markets that seem to be doing

25:48.920 --> 25:52.200
very well and plow right through it, take us through

25:52.200 --> 25:55.240
sort of the case for looking at the

25:55.240 --> 25:57.800
All-in-Ones, taking a look at the ETFs that are offered by

25:57.800 --> 25:58.760
Fidelity.

25:58.760 --> 26:01.840
Absolutely. I always break it down by

26:01.840 --> 26:03.200
what are you trying to accomplish. There's

26:04.960 --> 26:07.200
the long term strategic core holding.

26:08.760 --> 26:10.680
Long term returns are dictated by your asset allocation.

26:10.720 --> 26:13.800
If you have a 30-year time horizon it's

26:13.800 --> 26:16.400
your 80/20, 60/40, not what Trump tweets.

26:17.720 --> 26:20.120
That's not going to move it as much.

26:20.120 --> 26:23.000
Geopolitical risk, yeah, they cause a little kerfuffle but in

26:23.000 --> 26:25.240
the long run it doesn't really affect the long term.

26:25.240 --> 26:26.240
You have time to recover.

26:27.720 --> 26:30.480
I think I was making this joke, if you're legacy planning for

26:30.480 --> 26:33.440
100 years you'd just always be investing in equities, it will

26:33.440 --> 26:34.440
recover over time.

26:36.080 --> 26:39.360
The All-in-Ones are a perfect solution for your here's a

26:39.360 --> 26:41.360
strategic core holding, I'm going to hold it for the long

26:41.360 --> 26:44.160
term. We have the four factors that work at a different time

26:44.160 --> 26:46.480
in the business cycle, we're not going to make a call.

26:46.480 --> 26:49.640
This is just excellent, low cost core solution.

26:49.640 --> 26:52.520
Then if you are looking at, okay, I want to do a tactical

26:52.520 --> 26:54.360
trade. What tactical trade?

26:54.360 --> 26:57.520
Are you too much in the United States and you're looking at

26:57.520 --> 27:01.080
international then we do have an excellent international ETF.

27:01.080 --> 27:02.480
[FSIN?], it's the four factors.

27:02.480 --> 27:05.920
If you do want to play more of that lower P/E

27:05.920 --> 27:07.440
we have the international value.

27:07.440 --> 27:10.440
Again, performing excellently if that's the pair.

27:10.440 --> 27:13.080
Quality in the United States and value.

27:13.080 --> 27:15.960
Some people do want to stay in the United States.

27:15.960 --> 27:18.720
They just think that it's great, they're just a bit top heavy

27:18.720 --> 27:20.240
with regards to the Magnificent 7.

27:21.360 --> 27:23.800
We have FCAN, which is the four in case you don't want to

27:23.800 --> 27:26.840
make a call and go rotate it, but the

27:26.840 --> 27:29.120
S&P 500 is a quality index.

27:29.120 --> 27:31.080
They screen for income to be included.

27:31.080 --> 27:34.200
We have our US value, again,

27:34.200 --> 27:37.240
underweight the Magnificent 7, generating twice the amount

27:37.240 --> 27:39.800
of cash flow to the S&P 500, lacking some of the Magnificent

27:39.800 --> 27:42.880
7. There are options, just reach out to your

27:42.880 --> 27:45.640
wholesaler, we'll be more than happy to sit down to customize

27:45.640 --> 27:46.560
a portfolio for you.

27:46.560 --> 27:50.240
Yes, with a very active approach to

27:50.280 --> 27:52.920
ETFs and not passive.

27:52.920 --> 27:54.240
Vince, great to see you.

27:54.280 --> 27:56.200
Happy New Year. That's the end, we won't say it again.

27:56.240 --> 27:58.080
Have a super weekend and thanks for joining us here today.

27:58.080 --> 27:58.920
Thank you so much.

27:59.440 --> 28:02.720
<b>Thanks for listening to the</b>

28:02.720 --> 28:04.280
<b>FidelityConnects podcast.</b>

28:04.280 --> 28:07.200
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28:40.280 --> 28:42.840
<b>a short disclaimer.</b>

28:42.840 --> 28:45.640
<b>The views and opinions expressed on this podcast are</b>

28:45.640 --> 28:48.760
<b>those of the participants, and do not</b>

28:48.760 --> 28:51.280
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28:51.280 --> 28:54.160
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28:54.160 --> 28:56.400
<b>any affiliated companies.</b>

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<b>This podcast is for</b>

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<b>informational purposes only and should</b>

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<b>not be construed as investment,</b>

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<b>legal, or tax advice.</b>

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<b>It is not an offer to</b>

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<b>buy or sell or an</b>

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<b>endorsement, recommendation, or sponsorship of any</b>

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<b>securities or entities cited.</b>

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<b>Read a fund's prospectus before</b>

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<b>investing. Funds are not guaranteed.</b>

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<b>Their values change frequently,</b>

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<b>and past performance may or may not</b>

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<b>be repeated.</b>

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<b>Fees,</b>

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<b>expenses, and commissions are all associated with fund</b>

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<b>investments.</b>

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<b>Thanks for watching and see you next time!</b>