FidelityNow: Ilan Kolet: Navigating geopolitical uncertainty

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Hi, everyone, and thanks for joining me.

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There's been a lot of news and market volatility

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over the past couple of weeks,

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and I know it's top of mind for many Canadians.

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I want to spend a few minutes walking you through

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what's happened and how our team is approaching

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the situation to manage these

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events within our funds.

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It's been an eventful period that has received continuous

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coverage. The catalyst was on

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February 28th when U.S. and Israeli forces

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carried out joint military strikes on

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Iran. The immediate market

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reaction was what we typically expect

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in a knee-jerk response to geopolitical

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shocks and events.

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But since that initial shock, much of the

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focus has been centered more on

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a potential disruption to energy supplies,

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and what we're seeing now is the market trying to price

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in the duration of the conflict, which remains

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the key uncertainty.

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Our framework is built to withstand shocks

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like this. First and foremost, we

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focus on policy, not politics.

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Our job isn't to predict the next political

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move, but to analyze the economic

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and market implications of events as

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they unfold. We look at the potential

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impact on corporate earnings, inflation,

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economic growth, and asset prices.

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Second, we lean heavily

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on our deliberate research-based

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framework. One of the pillars of that

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framework is sentiment. In practice,

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this could mean we aim to take advantage

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of market fears

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rather than indulging them.

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We look for opportunities when sentiment becomes

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overly negative. For example,

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our asset allocation research team has noted

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that, for now, the fundamental picture

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of the U.S. business cycle remains in a

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mid-cycle expansion, and we

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remain cautiously optimistic on Canada

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as well.

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It would take a much more significant and

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sustained shock to oil

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to change that base case.

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So our approach

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is to remain disciplined, filter

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out the noise, and focus on how these events

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are or are not changing

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the underlying economic and market fundamentals.

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This is where our philosophy translates into

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tangible portfolio construction.

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Our primary goal is to build resilient portfolios

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before a crisis hits

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so we aren't forced to react in a panic.

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The key to this is diversification.

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But we believe in evolving beyond the

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traditional 60/40 portfolio.

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With the correlation between stocks and bonds having

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increased, we've been deliberate in

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adding other exposures. Specifically,

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here's what that looks like in our funds.

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Gold. We hold gold as a strategic

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position. We see it as a direct hedge

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against geopolitical uncertainty and

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potential U.S. dollar debasement,

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and it has certainly played that role well recently.

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Also, alternatives. We've been selectively

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introducing alternatives into

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our portfolios. In the managed portfolios,

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we have allocations to three Fidelity Canada

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liquid alternative strategies. and

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in the private investment pools, our partnership

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with Brookfield

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to manage commercial real estate is a great

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example of adding an asset class

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that we think behaves differently.

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The next thing is currency diversification.

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We've reduced our longstanding overweight

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to the U.S. dollar

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and diversified into other global currencies,

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like the euro and the yen. This

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is part of the broader view of

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managing U.S.-centric risks.

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Ultimately, history shows that while geopolitical

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shocks cause short-term pain,

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markets tend to recover. Our

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job is to ensure our portfolios are structured

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to weather the initial storm

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and are well-positioned for the long term.

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We remain attentive and prepared to adjust

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positioning as needed, but our diversified

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structure remains the primary foundation

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that supports our clients and our funds.

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So while the headlines are concerning, our message is one

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of discipline and preparedness.

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Our process is designed for this.

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Thanks for your time, and please don't hesitate

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to reach out to your Fidelity representative

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with any further questions.