Ilan Kolet: Key portfolio shifts

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Hi, I'm Ilan Kolet, Institutional Portfolio Manager and member

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of Fidelity's Global Asset Allocation Team.

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Uncertainty has risen, is artificial intelligence a bubble, the conflict with

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Iran and the trade war may unfold in many ways, and the underlying forces

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remain difficult to predict.

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But that doesn't excuse standing still.

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Our job is to read how markets are pricing the uncertainty, then manage

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the risks and pursue the opportunities they create.

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Here are three ways we're doing that.

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First We still prefer stocks to bonds, but we've trimmed that

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preference. The big picture remains supportive.

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Growth is strong, and a shift in income from labour to capital is

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really driving explosive earnings growth.

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Higher bond yields don't worry us much, we see them mainly as a reflexion of

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that strength. What's changed are the signals from the ground up.

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The analysts and portfolio managers closest to AI companies have grown more

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cautious. Plan spending on AI infrastructure.

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Sets a very high bar for future revenue to clear, and regulation

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or public backlash could slow progress.

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We still believe AI's long-term potential is considerable.

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But transformational technologies never move in a straight line, so we've

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trimmed our equity overweight, especially where exposure to AI is highest.

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And for years, our analysts expected companies to beat even lofty earnings

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forecasts. Now, the market has largely caught up.

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Which leaves less room for positive surprises.

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Second, bonds.

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We remain underweight duration and prefer credit and other spread sectors to

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investment grade bonds.

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Demand for borrowed money is surging.

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Companies need to build AI infrastructure.

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Governments need to fund large and growing deficits.

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Borrowers have to pay more to attract lenders and we expect that to last,

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keeping yields elevated as long as the economy stays reasonably healthy.

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Central banks are also starting to tighten, inflation looks stubborn, and

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an increasingly activist US treasury risks its credibility

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by leaning against the market.

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So we've moved away from US bonds toward other markets,

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including Canada, and we've added diversifiers like commodities, gold, and

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select alternatives. Third, and most importantly, Canada.

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No one can make a high conviction call on AI yet, so we want exposure

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to the theme and to markets.

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Could do better if the excitement fades.

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With its heavy weight in resources and financials, the TSX is one

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of the least AI-correlated markets out there.

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The domestic picture is improving too.

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Growth has rebounded strongly from its late 2025 slump,

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and our modelled probability of recession has fallen sharply, despite

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the escalating trade war with the US.

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Exports are broadening to partners beyond North America.

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Commodity prices are firmer. And new policy initiatives, including the first

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Canadian Investment Summit, are prioritising investment in infrastructure

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and natural resources.

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Execution will take years and conditions at home are still challenging.

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For the first time in a long time, there's a path to

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better and global investors are only starting to notice.

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Many of our funds now hold their largest overweight to Canada in more

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than a decade. Uncertainty is high, But standing still is

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a decision, too. Just as Canada can't sit still in an uncertain

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world, neither will we.

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We'll keep following our process to seek return and manage risk on your

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behalf. The full paper, Acting Despite Uncertainty,

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is on Fidelity.ca.

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Thanks for watching.