FidelityConnects: Jurrien Timmer – The global macro view March 9, 2026

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Hello, and welcome to Fidelity Connects.

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I'm Agnes Doherty, Vice President of Regional Sales here at Fidelity Canada.

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It's the start of a new trading week and markets are under pressure.

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US equity slid this morning at the opening bell as oil prices surged past

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$100 a barrel, a level not seen since 2022

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when prices soared in the wake of Russia's invasion of Ukraine.

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The jump has reignited concerns about a potential stagflationary backdrop,

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one that's defined by rising inflation and slowing economic growth.

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What can past oil shocks teach us about how markets and economies adapt, and

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more importantly, what are the signals that investors should be watching

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now as energy volatility returns to the centre stage?

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Joining me now to unpack all of this and more to set you up for the trading

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week ahead is Fidelity Director of Global Macro, Jurrien Timmer.

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Jurrien, welcome. Thanks so much for joining us today.

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It looks like you're at our head office there in Boston.

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Yes, I'm at the mothership. Welcome, Agnes, to the show.

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I'm sure you've been on before but we haven't been on together so looking

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forward to our conversation.

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It's great to be able to chat with you, especially today.

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Obviously, markets are near all-time highs but the headlines this week have

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been incredibly heavy.

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Just a few weeks ago we're talking about this Goldilocks scenario in the

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markets where we had stable earnings, we had an easing Fed,

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a stable bond market, and now we've got oil prices over $100

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and so much geopolitical tension and uncertainty.

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Let's talk about it and give us

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your update on where we stand today.

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There's a lot to unpack. If we go to slide 1

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we can see that this is, obviously, all about oil prices,

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at least for the markets.

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Of course, this conflict with Iran kind of

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came a little bit out of the blue.

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The markets were riding high on the Goldilocks theme.

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There was the convergence trade between the Mag-7 and everything

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else was working in a very benign way, meaning that

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the broadening didn't come at the expense of the market cap leaders.

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We had very robust earnings, we still do, about

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15% earnings growth, an easing Fed down to 3%,

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bond market very, very quiet, the dollar quiet, it

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really was a very sort of nice mid-cycle

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type market. I suspect at some point that

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will return and that these convergence trades will resume

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once the tree has been shaken of sort of the the

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fast money crowd, if you will.

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Right now, of course, the big question is oil prices spiked to

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about $108 overnight, they're still up but they're

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at 96 right now. As a result the market is bouncing back.

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We see the S&P down about

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4, 5% from the highs, EAFE around 7%,

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EM around 10%. It's what you would expect when you see a

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massive spike in the oil price.

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If we go to slide 3 you can see historically that

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we've had a number of oil shocks.

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In the top panel I showed the 5-year CAPE ratio

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for the S&P 500, in the bottom panel

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in the brown is the nominal oil price, and in the purple

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is the inflation-adjusted oil price indexed to today's

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dollar. You can kind of measure the previous moves in

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terms of what oil is trading at today.

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Of course, we had the big oil shocks in the '70s,

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the Yom Kippur War in 1973, and then the Iranian Revolution

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in '79.

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We had the Gulf War in 1990, that was sort of a

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quick one and my guess is that maybe the administration was hoping for

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a repeat of that. Then, of course, we had not a conflict

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but we had the peak oil theme

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back in the 2000s.

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In 2022 we had the Ukraine conflict that spiked oil prices

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as well.

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Right now we're, obviously, in this conflict.

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It's not like Venezuela where you just decapitate the head of the snake

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and you take over.

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Iran is a whole different ballgame.

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There's a reason why this region has been in conflict for

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1,000 years so maybe the administration bit off a little bit more than

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they can chew here.

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There's already a new Ayatollah, the son of the former one,

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I don't think the Republican Guard is going to go anywhere.

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The big question for the markets is, is

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the market correct in assuming that this will last

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a few weeks, or maybe more, but then we will revert

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to normal and the Straits of Hormuz reopen, that is

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the epicentre right now, or will

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it be longer, or will the President declare victory

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even though he doesn't have one and we get into a TACO moment and

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then hope that things go back to normal.

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There's a lot of variables, China gets its oil from Iran so maybe

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China can become a peace broker of some sort.

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We don't know. In the meantime, as you mentioned, this is

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somewhat stagflationary, at least over the near term.

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Obviously, oil prices going up adds maybe half a per

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cent to the inflation rate.

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The Fed does tend to focus on core inflation but still inflation is

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inflation. If the Fed was on a path to cut to 3%

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maybe that path takes longer or instead of

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3 it's 3 1/4 or no more cuts at all.

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That's been reflected in the long end but still at 4.13 the

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10-year yield is hardly at a level that's going to affect the market

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in a meaningful way.

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Right now we wait and it's a matter

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of how quickly or slowly this resolves.

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You can see that in the oil futures curve, the forward contract

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minus the front contract, and the oil curve is in

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severe backwardation, as you would expect, because the Straits of Hormuz is

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closed and many oil producers have already halted their production

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or slowed down to production.

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The back contract, let's say for nine months from now, is trading

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at closer to 65, 70 and the current contract

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is trading at 96, that's for WTI.

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The oil market is expecting this to be temporary.

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I think the market is taking its cues from the crude oil market right now.

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Just so much uncertainty and so many unknowns at this point.

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Based on your analysis at what point does higher oil actually become

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a real economic problem?

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Is it the level of oil prices or is it the length of time that they

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stay elevated that really will determine that?

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One thing to note, and this is good news, is that

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the American consumer, and I presume the Canadian consumer as

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well, is far less sensitive to the price of oil than

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it was during the '70s or even the '80s and '90s.

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Just a lot less of personal consumption expenditures

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come from gas and oil.

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The price of oil going from 70

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to 100 and not going much further

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I think is a shock kind of like tariffs that can be absorbed,

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especially if it's not a permanent shock.

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Historically, what we've seen is it's less the level

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of oil prices and more the rate of change.

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Again, think about the oil shock of the '70s, you went from $3

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to $12 when consumers were

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spending a lot of their disposable income on energy, that is

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a true shock. Going from 70, 100 or even to 150,

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if it doesn't stay there and it comes back it'll be a shock, it

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will shave some growth off of GDP and it will add some inflation

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to the CPI, but it would be kind of a one-off thing.

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That's why the length and how protracted this conflict becomes

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will be very important for the markets and that's why the market basically

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is trading on this oil spread between now and, let's say,

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a year from now or six months or nine months from now.

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You mentioned stagflation, we've seen that word creeping into the headlines

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over the weekend as well. Do you think that that is a real risk to the market

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or is this comparison with the 1970s a little bit overdone at this

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point?

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I think for now it's overdone but again, it depends on how transitory

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the spike is. We have seen spikes before.

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We saw one in 2022 and although that did coincide

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with a bear market in equities that bear market really was predicated

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on sharply rising cost of capital and not a

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problem with consumer spending. Obviously, inflation was

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a big problem but oil was only a part of that.

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It was all about COVID and supply chains.

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In 1990 during the first Gulf War

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oil prices in today's dollar terms did spike quite a bit to $100,

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again, in today's terms but they fell back as

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quickly as they rose and that had very little impact.

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There was a recession in 1990 but that had more to do with the savings

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and loan crisis than with the price of oil.

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If it is transitory I don't expect

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that any stagflationary effects will linger but

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if this becomes a long, drawn-out thing, even if the

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President says, okay, I'm declaring victory, the

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Republican Guard in Iran might not agree with that unless they're getting

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brokered by China or something like that.

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So it really depends.

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There are always other factors going on.

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You do have potentially quite some deflation coming from

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the AI boom, although that could be labour of deflation so that

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is not necessarily a good thing. We always have to weigh all of these

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things together, just like the tariffs last year

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produced some inflation but it was offset by, for instance, lower oil prices,

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there's always a number of things going on.

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The way it is right now at $96 WTI, I

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don't think this will have lasting problems for the US

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or Canadian consumer or the economy.

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Let's bring the conversation to Canada for a moment.

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I think I speak for everyone when I say we're very invested in what happens to

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Canadian markets and especially the Canadian dollar as well.

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How do you see the sort of geopolitical tensions and the

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higher oil prices as a consequence of that playing out for

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Canadian markets as a net exporter of oil?

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I think Canada wins over this.

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Right now the US dollar is bid as it tends to

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get done when there is uncertainty and tension

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but I think that too will be transitory.

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I think the Canadian dollar will be okay in this.

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I think any export of commodities, you can see in

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this new geopolitical world where we have spheres of influence rather

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than this one super cop ruling

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the entire planet, commodities become a strategic asset

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and it's not just gold, it's not just oil, it's copper, it's other assets

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and I think this is going to be part of the power play that we

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see happening around the world. I think any country that is

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a big producer of natural resources, and you've got two of them, you've got

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gold and oil, and others, of course, I think

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that is an asset. I think whether that plays

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a role in a USMCA revision or just

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Canada exporting to other continents, not forget

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a Straits of Hormuz which will be a big plus, I think is

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good for the long term.

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

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I wanted to share that here at Fidelity, we value your opinion.

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DialoguesFidelity podcasts available on Apple, Spotify, YouTube, or wherever

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else you get your podcasts. Now back to today's show.

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Let's talk about the Fed. We have a new Fed chair, very accommodative

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Fed policy, how do you see what's playing out in the markets now potentially

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impacting where rates in the US go from here, what's being

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priced in right now?

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Let's go to slide 7 which shows the Fed funds forward curve,

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or the SOFR curve.

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Just the developments over the last few days have

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taken out one rate cut from the expected path.

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That dotted black line is the SOFR curve.

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It was at 2.94 at the low point last week, it's

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now at about 3.20. It's not a huge difference, it's one rate cut, and I think

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the Fed really only had two more rate cuts anyway.

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Fed is at 3 5/8 right now.

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eights right now so going to 3 1/4 or going to 3 in

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my view is not really that big a deal.

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The 10-year yield, which is in the bars there, it shows how

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tightly knit that triangle has

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been, and we're still sort of coiling in that triangle.

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Not that much is happening on the rate side.

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We will have the FOMC meeting coming up shortly and we

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will have new leadership at the Fed which, presumably, will be Kevin Warsh.

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He will want to lower rates.

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Stephen Miran was on CNBC last week and he was saying he

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thought neutral was about 2 1/2 to 2 3/4.

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I have no idea where he gets that number because inflation is at 3

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and R-star, at least according to the Fed's own estimates, is at

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1 1/2. That gets you to 4, 4 1/2 as neutral.

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Not to call them political pushovers but there is an agenda

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there to push short rates down, maybe steepen the yield curve,

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deregulate the banks, and get the commercial banks to take over,

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essentially, the assets that are on the Fed's balance sheet.

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That would be the way that the Trump administration would bring

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the benefits of QE from Wall Street to

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Main Street. I think that is an overriding agenda.

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I think Warsh and Bessent will work together on that.

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I don't see this really changing anything.

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It might change the speed at which they get to 3% or

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lower but I think assuming that we're not going to

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be looking at $150 oil prices for the next several years in

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a row I don't think this scenario is going to change

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the path forward that much.

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We do have a question coming in here from the audience and a good reminder for

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everyone on the call please do submit your questions to Jurrien through the Q&A

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box. This listener wants to know what are your thoughts on the

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US job numbers right now?

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The jobs report last Friday was weak.

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There was a loss in jobs and more downward revisions

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in previous months.

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It's a mixed report because the ADP numbers were

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reasonably healthy.

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The household survey was healthy.

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Fidelity actually has a hand in I think something

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like half of the S&P in terms of we

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do the benefits administration for large companies so we have a

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sense of where job hiring is going on a real

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time basis because we administer the payrolls,

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and our own proprietary data suggests that the jobs market is

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okay. It is a slow hire, slow fire type

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of market.

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Of course, there are some distortions.

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There was a health care strike last month that lowered the payroll

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numbers. There's the birth-death adjustment rate.

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There, obviously, is a slowdown because immigration is at a standstill.

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It's not by any means a robust jobs market but

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I think the overall market is not as weak as the jobs report suggests

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last Friday.

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I wanted to take the conversation to the US equity market.

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You've been talking about this a lot recently.

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Investors have been reducing concentration in Mag-7, going into

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more equal-weighted benchmarks as well as down the cap spectrum, just

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give us your most recent update on that trade and do you

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still think that that rotation has legs?

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Let's go to slide 5.

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So my sense is that the convergence trade

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where everything else, including international equities,

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catches up to the S&P cap-weighted index

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which, of course, has been heavily influenced by the Mag-7.

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In this chart I show the cap-weighted S&P at the top, the

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equal-weighted below that, you can see that the equal-weighted

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really accelerated higher in recent weeks and then gave a good chunk of it

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back last week. I think that's partly a reflection of

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the convergence trade, as I call it, or the broadening trade,

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became very popular so that means that fast money kind of jumps in.

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Whenever there's a shock in terms of headlines the fast money is the first

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to go, right, because they're maybe trading on leverage or they're tourists

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and not long term investors.

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Again, EM down 10% from the highs while the S&P is only down 4%

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or 5%. I think part of that is just repositioning.

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I don't think it has any impact on the underlying trend

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of convergence so I'm still very much in favour of

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the broadening trade. Again, so far it's been a benign

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broadening. Actually, if we go to slide 4 you can

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see that the Mag-7, which is in top panel there, continues

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to kind of hang on to the support line.

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I thought maybe this morning it would slice right through but with oil prices

19:37.509 --> 19:42.948
only up 6% instead of over $108

19:42.948 --> 19:47.152
the S&Ps are actually down only half a per cent so it's

19:47.152 --> 19:49.054
still hanging on there.

19:49.054 --> 19:53.492
I think that's an important chart because if the Mag-7 really

19:53.492 --> 19:57.963
falls underneath this range of the last four or five months

19:57.963 --> 20:02.134
the S&P is going to go down, there's no other way around it, and then you would

20:02.134 --> 20:06.071
get into kind of a 10% correction in the S& P, maybe

20:06.071 --> 20:09.942
a 15% correction in other markets.

20:09.942 --> 20:13.378
That's a correction, I think, that should be bought because, again, the

20:13.378 --> 20:18.350
fundamentals, earnings, margins, CapEx, productivity,

20:18.350 --> 20:22.554
rates, are all still very favourable and the

20:22.554 --> 20:25.657
average stock isn't really that expensive.

20:25.657 --> 20:29.728
The S&P equal-weighted index is trading at a 19 P/E which

20:29.728 --> 20:33.665
is above average but it's not

20:33.665 --> 20:36.268
that far above.

20:36.268 --> 20:38.537
What's happening now, I think, is repositioning.

20:38.537 --> 20:41.106
If we go to slide 6 we can see this.

20:41.106 --> 20:45.510
Before the Iran conflict began

20:45.510 --> 20:49.648
the correlation, the 13-week correlation between the S&P equal

20:49.648 --> 20:53.919
and S&P cap-weighted plummeted from

20:53.919 --> 20:58.223
almost 100% where it normally is to about 40%

20:58.223 --> 21:02.494
and the correlation between the

21:02.494 --> 21:06.765
ex-US, so the MSCI ACWI ex-US and the S&P,

21:06.765 --> 21:08.667
actually went negative.

21:08.667 --> 21:12.704
That shows you the broadening trade that the

21:12.704 --> 21:17.209
cap-weighted index became less and less correlated with these other components.

21:17.209 --> 21:21.380
Now, we know that at times of stress correlations

21:21.380 --> 21:24.416
go to 1 so they've already reversed.

21:24.416 --> 21:28.820
That was sort of a short-lived thing but I do think that once the dust settles,

21:28.820 --> 21:32.891
no pun intended, the trades that

21:32.891 --> 21:37.262
were in place before this conflict will resume.

21:37.262 --> 21:41.166
Sounds like overall fundamentals of the market are very strong and a 10% to

21:41.166 --> 21:45.304
15% correction is healthy and a needed shakeout

21:45.304 --> 21:47.606
for the overall market.

21:47.606 --> 21:51.410
Yeah, I mean, 10% corrections happen all the time.

21:51.410 --> 21:56.982
They happen basically every other year about 40% of the time historically.

21:56.982 --> 22:01.486
As long as the fundamentals remain robust, and they certainly do,

22:01.486 --> 22:03.722
I think it's one that you use to rebalance.

22:03.722 --> 22:07.826
We all should be rebalancing and markets were

22:07.826 --> 22:12.230
maybe a little bit over their skis but not too much.

22:12.230 --> 22:16.201
I think this is a far better scenario than

22:16.201 --> 22:20.138
it could have been because last fall, I

22:20.138 --> 22:23.975
remember we were in Palm Beach and everyone was talking about is this an AI

22:23.975 --> 22:28.080
bubble? If this really had turned into a bubble and the P/Es

22:28.080 --> 22:32.150
got really stretched and the trends got really stretched this

22:32.150 --> 22:36.254
kind of headline would do a lot more damage than if the market is

22:36.254 --> 22:39.558
relatively in balance with the fundamentals.

22:39.558 --> 22:41.693
That's not to say the market wasn't a little bit stretched.

22:41.693 --> 22:46.331
My own DCF model suggests that

22:46.331 --> 22:50.635
fair value was around $6,500 instead of $7,000.

22:50.635 --> 22:54.239
Guess what, as of this morning we were at about $6,500.

22:54.239 --> 22:58.210
I think the market's okay here and the fundamentals will win the day as

22:58.210 --> 22:59.511
they always do.

22:59.511 --> 23:03.548
Speaking of the AI bubble conversation, has that really just died down?

23:03.548 --> 23:07.419
I know the CapEx spending numbers have been astronomical but if someone was to

23:07.419 --> 23:12.391
ask you today about the AI Bubble what would your response be to that?

23:12.391 --> 23:14.526
The AI story hasn't gone away.

23:14.526 --> 23:17.896
We can pull up slide 2 here.

23:17.896 --> 23:22.000
There are still two very big critical questions about

23:22.000 --> 23:26.004
the AI revolution. Well, there's many questions, of course, but two of

23:26.004 --> 23:30.142
them for the markets are is all this

23:30.142 --> 23:35.013
CapEx by the hyperscalers, hundreds and hundreds of billions a quarter, are

23:35.013 --> 23:39.384
they going to generate an ROI for those companies, or

23:39.384 --> 23:43.388
is it one company takes all the

23:43.388 --> 23:48.560
wins and the other one loses and then there's maybe a trillion dollars

23:48.560 --> 23:52.664
of infrastructure spent that doesn't see a return.

23:52.664 --> 23:56.635
That, I think, is a very legitimate question and we don't

23:56.635 --> 23:58.737
know the answer.

23:58.737 --> 24:02.441
We've been in that phase where the picks and shovels win.

24:02.441 --> 24:06.478
Just like the gold rush a few centuries ago the companies that

24:06.478 --> 24:10.549
produce the things that the hyperscalers need

24:10.549 --> 24:14.519
to have in order to build the infrastructure, those

24:14.519 --> 24:18.690
companies have, obviously, been very successful, the semiconductors, the power,

24:18.690 --> 24:20.692
all of that stuff.

24:20.692 --> 24:25.697
Whoever wins the race, we don't know whether it's Google or Nvidia,

24:25.697 --> 24:27.999
but that is a legitimate question.

24:27.999 --> 24:33.004
The other one is, of course, in the software and SaaS stocks.

24:33.004 --> 24:37.242
One thing we're seeing, and this was the theme of that now

24:37.242 --> 24:41.346
infamous research report by Citrini a few weeks ago,

24:41.346 --> 24:45.283
a shop that no one's ever heard of but now has become quite

24:45.283 --> 24:49.654
well-known, where they said the worst case left tail scenario

24:49.654 --> 24:53.658
is that the AI boom just makes

24:53.658 --> 25:00.899
labour redundant because expertise becomes commoditized.

25:00.899 --> 25:05.804
Personal knowledge, human knowledge, has always been the scarce

25:05.804 --> 25:09.774
resource and in AI maybe it's not scarce

25:09.774 --> 25:13.812
anymore. Those are not my words but that is one scenario that's

25:13.812 --> 25:18.450
been bandied about. That gets you to the private markets, private

25:18.450 --> 25:22.721
equity, private credit, a good chunk of those

25:22.721 --> 25:25.457
investments have been in AI related software.

25:25.457 --> 25:29.528
In this chart in the bottom there you see above

25:29.528 --> 25:33.698
the dotted line WTI, the MOVE Index, the VIX,

25:33.698 --> 25:37.702
of course, what you would expect volatility measures across the board are

25:37.702 --> 25:41.706
up. In the bottom panel you see the drawdowns in the

25:41.706 --> 25:46.311
public companies that specialize in these private markets.

25:46.311 --> 25:50.615
Blue Owl has been over the news, Apollo, we just saw

25:50.615 --> 25:55.453
BlackRock gating their investors, so

25:55.453 --> 25:59.558
that is a sign of stress that there's been some misallocation

25:59.558 --> 26:00.759
of resources.

26:00.759 --> 26:04.896
Again, with AI it's so hard to predict what

26:04.896 --> 26:08.934
is going to happen once the machines take over, not to sound

26:08.934 --> 26:11.136
too dystopian.

26:11.136 --> 26:15.640
This is that creative disruption that happens when new technologies get

26:15.640 --> 26:18.710
invented and that's certainly been one of them.

26:18.710 --> 26:22.881
Overall I think it's still a

26:22.881 --> 26:26.952
fairly benign story and the productivity gains that the

26:26.952 --> 26:31.356
economy will benefit from will, hopefully,

26:31.356 --> 26:35.527
increase the non-inflationary speed limit of the US and

26:35.527 --> 26:39.564
world economy in such a way that we have a chance to kind of get

26:39.564 --> 26:44.135
in front of the debt burden that is growing by the day.

26:44.135 --> 26:46.938
Jurrien, we have a couple of questions here that I'd like to get to just in the

26:46.938 --> 26:51.142
last few minutes. One of our viewers would like to ask about the US midterm

26:51.142 --> 26:54.713
elections and how do you see that impacting the markets.

26:54.713 --> 26:57.949
What does history tell us?

26:57.949 --> 27:01.586
Sorry, Agnes, can you repeat the question because there's some crackling on the

27:01.586 --> 27:02.520
line.

27:02.520 --> 27:06.291
Yes, a viewer is asking about the US midterm elections and how that may

27:06.291 --> 27:09.961
potentially impact the markets. What does history tell us about that?

27:09.961 --> 27:14.132
I'm sorry but we're having some audio problems

27:14.132 --> 27:16.034
here. I know we have two minutes left but

27:16.034 --> 27:20.472
let me just, I'm sorry, I don't know what you asked, but let me just talk about

27:20.472 --> 27:23.508
while we are in the closing.

27:23.508 --> 27:27.445
When I think about asset allocation and

27:27.445 --> 27:31.449
a balanced portfolio, let's go to slide 10, what

27:31.449 --> 27:35.920
has really worked recently has been commodities

27:35.920 --> 27:38.490
and non-US markets.

27:38.490 --> 27:43.662
If you take a 60/40 in the blue and a kind of hypothetical 60/20/20,

27:43.662 --> 27:47.632
not investment advice at all, you see how well

27:47.632 --> 27:51.202
those markets have been going.

27:51.202 --> 27:55.240
When we think about the correlation effect of a

27:55.240 --> 27:59.444
well-balanced portfolio which, of course, today is another example

27:59.444 --> 28:03.882
of why we need to be well diversified, if we go to slide 11

28:03.882 --> 28:08.019
we can see the correlation between equities

28:08.019 --> 28:12.390
and bonds, that's slide 11, has

28:12.390 --> 28:14.292
really been evolving over time.

28:14.292 --> 28:18.730
I think still equities

28:18.730 --> 28:22.734
are the driver of a 60/20/20, a much more

28:22.734 --> 28:26.671
global swath. Certainly one thing I'm looking for in the next few

28:26.671 --> 28:31.843
weeks or months is an opportunity to get back in the same

28:31.843 --> 28:35.880
broadening trade that has worked so well since the tariff tantrum

28:35.880 --> 28:37.415
last year.

28:37.415 --> 28:42.220
The other thing that really is on my radar is slide 14, and that's Bitcoin

28:42.220 --> 28:45.790
which actually is doing quite well right now.

28:45.790 --> 28:49.994
60,000 is still the level that I'm really focusing on here

28:49.994 --> 28:54.365
as an entry point. So far it has held quite well.

28:54.365 --> 28:58.636
I do think that the degree to which

28:58.636 --> 29:02.741
Bitcoin is oversold against not only its own trend but also

29:02.741 --> 29:06.978
against gold is that that could be one of the next big plays

29:06.978 --> 29:09.514
in the coming months.

29:09.514 --> 29:12.817
Okay, we're going to wrap it up here.

29:12.817 --> 29:17.188
Jurrien's a pro so he's able to handle these technical issues

29:17.188 --> 29:21.192
in his sleep. Thank you so much, Jurrien, for your time today.

29:21.192 --> 29:25.430
Wonderful hearing from you and, hopefully, this has provided everyone with some

29:25.430 --> 29:29.100
really great insights and timely insights into everything that's happening in

29:29.100 --> 29:30.368
the markets right now.

29:30.368 --> 29:34.305
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