FidelityNow: Five questions into 2026: Insights from Ilan Kolet

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Hi, I'm Ilan Kolet, Institutional Portfolio Manager on the Global

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Asset Allocation team here at Fidelity.

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Market returns in 2025 looked much like they did in 2024.

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Stocks returned a lot, bonds returned a little, and gold beat everything.

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But the journey was different, including some breathtaking volatility and

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a sharp reversal in the U.S. dollar.

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Through it all, we've remained faithful to our process in managing Fidelity's

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multi-asset class funds for Canadian investors.

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Layering active asset allocation and security selection over

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a thoughtfully diversified structure to drive risk-adjusted return.

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Our largest fund, the Global Balance Portfolio, returned over 13%

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net of fees in 2025, the third straight year of

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double-digit gains. We can't promise that the market will offer us such

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strong returns indefinitely, but we can promise that

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our proven approach will not change.

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As 2026 begins, the questions we

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hear most from you match what's top of mind for us as investors,

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and we provide brief thoughts on those topics in our Q1 thought leadership paper.

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First, the big one.

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Is AI a bubble?

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Frankly it's too early to say for sure.

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Valuations are expensive, and the macro picture is a bit shaky, but our

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equity teams remain solid.

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They continue to see the market underestimating the earnings power of these

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companies. Our core belief is that stocks follow earnings,

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so our strategy is threefold.

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Number one, we remain moderately overweight equities using skilled growth

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managers. Two, we are staying highly diversified in areas

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outside the AI trade like EFI and EM.

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And three, we're ready to pivot quickly if the earnings

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outlook changes.

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What are our concerns around the U.S.?

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While the AI boom has supported U.S. assets, we see rising risks from

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government policy, particularly actions that threaten the Fed's independence.

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This looks like a policy of currency debasement to us to inflate

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away a massive debt burden.

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In response, we've made significant moves.

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After more than a decade, we eliminated our overweight to the U.S. dollar,

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diversifying into the Euro, Yen and Gold.

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We've also sold our direct holdings of U.S. treasuries.

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Third, we turn to Canada.

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Things may not feel great, but why do we sound optimistic then?

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We see a market where improving fundamentals are not yet priced

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in. GDP growth has rebounded, unemployment has

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fallen, and the recent federal budget shows a welcome focus on productivity.

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Because of this, we acted last year to fill in nearly all of our

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long-standing underweight to Canadian assets, which has already paid off.

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How are we evolving the 60-40 portfolio?

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As you know, the correlation between stocks and bonds has risen, making

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traditional diversification less effective.

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To address this, we are adding alternatives.

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On the liquid side, we're using stock selection strategies with low correlation

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to the broader markets, and on the illiquid side, we're partnered with

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Brookfield Asset Management

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to give our clients access to private Canadian commercial real estate.

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Our research into new diversifying assets remains a key

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priority for 2026.

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In summary, our disciplined process of active asset allocation

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allows us to adapt to a changing world.

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We are staying agile, managing risk, and positioning portfolios

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to capture opportunities as they arise.

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I encourage you to read the full paper on Fidelity.ca for

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a deeper dive.

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Thank you.