FidelityConnects: Jurrien Timmer – The global macro view May 11, 2026

Pamela Ritchie: Hello, and welcome to Fidelity Connects. I'm Pamela Ritchie. Though a continued standoff over the Straits of Hormuz leaves markets with uncertainty the sea blockade appears to not be enough to derail bullish bias in these markets, at least not for now. The thus far earnings print has allowed what our next guest calls a right tail mojo to play out as strong underpinnings of growth and ample margins support stock prices. However, it is important to look deeper into the weeds to understand how parabolic blowoffs can happen in similar market moments and to compare with other historic analogies. The left tail risk outlines the story of inflation from here. With oil prices high and able to trickle through the global economy the rate story may become central to investor confidence once again. What would that take and would resolution in the Straits of Hormuz put that rate rest to bed? Joining us now to discuss his weekly outlook for global equities is Fidelity Director of Global Macro, Jurrien Timmer. Warm welcome to you, Jurrien. How are you today? 

Jurrien Timmer: I'm well, thank you very much. Greetings from Santa Barbara. 

Pamela Ritchie: Fantastic to have you join us. This discussion also has live French interpretation so do join us in either official language. You've been speaking with investors at various conferences, Canadian investors. They've heard some of this discussion but we'll add more to it. How have your trips been? 

Jurrien Timmer: Good. I was in Scottsdale for our FOCUS, heading over to Reno in a couple of days and getting ready to go hit something like seven countries through Asia in June. It's going to be a busy summer but a good one. 

Pamela Ritchie: It really is. Well, fantastic to have you with us here today. Let's begin what the markets, the equity markets, are absolutely fine with. That appears to be absolutely no conclusion in the Strait of Hormuz and high oil prices for now. 

Jurrien Timmer: Pull up slide 1 which is my weekly heat map. The market's in a really strange place, and I don't mean that necessarily in a bad way. I've rarely seen a market that has these two tail risks lurking on either side. The market is just sort of threading that needle right now. We have the Strait of Hormuz which remains mostly closed. It doesn't seem urgent anymore. There'll be some rhetoric, I mean, President Trump just said this and then the Iranians say something else but nothing is really happening. It's kind of an impasse. I don't think there's any will to bomb and to reaccelerate. You see there in the light blue there, the polymarket, this is about the betting markets for the Senate and House, you can see that when the bombing stops the Republicans' numbers go better, do better, and vice versa. It is very much in the administration's interest to not escalate this thing. 

At the same time, we go to slide 10 for a second, we have an oil market that remains in a severe state of stress. The green and the blue, the blue is the difference between the front contract and the ninth contract, when it's negative it shows that the oil curve is in backwardation which usually means that there is a lack of inventory, which is true because oil is not moving through the Strait. You can kind of convert that into a stress level, and that's the green, the amount of stress in the oil market is worth about $44 a barrel. It's about the highest since, I guess, at least the 1980s when oil futures started trading. The oil market is in a severe state of stress. The global economy depends on it, not just for energy but for fertilizer, for helium, for all kinds of things. The longer that this persists the more it feeds into inflation. 

At the same time, if we go to slide 11 we can see that as that backwardation persists, the red line is the ninth contract, the spot is at 101 for Brent, you can see the correlations in the bottom continue to get more dispersed. Bonds to stocks is getting increasingly more positively correlated. Stocks to oil is getting increasingly more negatively correlated. If this left tail ever decides to really come and bite us ... right now it's not really biting us, things are fairly calm because the market has latched on to the AI earnings boom as the thing they want to run with. I've read a report from JP Morgan, for instance, that if this continues by the end of June the inventories, oil inventories, will reach dangerously low levels and by the end of July they will reach sort of catastrophic levels where the whole system starts to shut down. At that point you could see spikes that sort of are much bigger than what we've seen so far. 

It's a real risk and it's one that the market is ignoring just because it hasn't become acute yet. Because the rhetoric coming out of the White House and vice versa, it's so often and there's so many threats and so many this and so many that that the market has just gotten desensitized to it, which is an exact copy of the tariff tantrum last year. Eventually, you just start to ignore it all and you're just like, well, let's focus on what we can control, which is earnings, interest rates, things like that. On that front, if we go to slide 2, you can see what the market really is focusing on and that is this incredible run in AI driven by CapEx and exploding earnings. The S&P is there in the black, we know what the S&P has done. You look at the AI memory stocks, the data centres, the semis, they're blowing them all out of the water, no pun intended given the Strait of Hormuz. That is the right tail, and then on the right tail this boom is so severe given what's happening to earnings, we can't help but start to wonder whether this boom will become a bubble. 

We had this conversation six months ago and it never happened, fortunately. It's good that it never happened because when we had the Strait of Hormuz thing happening, if the market had been a bubble that would have created a much more severe downturn, but it didn't. Now we can start to think about, okay, we got boom on one hand, bust on the other and a bubble is a third outcome, how is that all going to play out and how do we protect ourselves in a portfolio.

Pamela Ritchie: I'm going to ask you to try and answer that question for us in just a second. One of the underlying pieces of sort of the story of this week is the meeting between Trump and President Xi of China and this visit. The Wall Street Journal said that every moment of trade policy in the Trump administration this time round has led up to this meeting that's happening this week. I don't know to what extent you agree with that but It's interesting considering all of the different pieces that you're talking about right now. How important is this meeting to everything from solving the oil crisis to, well, everything?

Jurrien Timmer: I think it's very important. Remember, the tariff tantrum was 13 months ago and it really ended when China and the US declared a truce, if you will. Trump was really blasting China and saying we're going to do all these tariffs, assumingly not realizing that China really holds all the cards because it controls the rare earths. Once there was a summit on that this whole thing went away because the US realizes without rare earths you can't do anything and China, essentially, controls I guess 90% of the rare earths around the world. Trump says only nice things about Xi, just like he only says nice things about Putin, not to put those two in the same category, but my guess is that they'll have a meeting and they will extend the truce and that it'll be fairly benign. Trump, who easily gets persuaded by powerful leaders will come away saying all nice things about China. 

There is a dimension there that, obviously, China is a major recipient of oil that comes not only directly from Iran but just out of the Strait of Hormuz. If I was Xi I would play that as a card, saying, look, we'll give you the rare earths you want, even though we are in a race for the prize on AI, but we need that oil to flow. Maybe that becomes a bargaining tool for Trump to back off on keeping the Strait of Hormuz closed and just sort of declare victory and walk away. That, of course, would be incredibly bullish because then the left tail is removed and then you just have the right tail. At that point we could really bubble over. A lot is at stake here but I think the oil conversation has to be part of that conversation, I would think, at least if I was Xi Jinping. 

Pamela Ritchie: To what extent are markets taking that into consideration right now? As you say, the left tail is everything to do with inflation and its implications all the way down to the consumer but also to how businesses handle it and how they are valued based on being able to handle it. It'll never be that easy but could this meeting fix it? 

Jurrien Timmer: I think the market has learned that a lot of rhetoric comes out of the White House. Not all of it makes sense all the time. It can be very harsh. When the markets react in a negative way they get walked back. Again, we've talked about this. I can just envision... 

Pamela Ritchie: Enter Scott Bessent right stage. 

Jurrien Timmer: Yeah, yeah. Trump has all these phones and he'll get the phone from Scott Bessent and he says, look man, you got to back off. That's just my speculation. 

Pamela Ritchie: We're just imagining the cartoon. 

Jurrien Timmer: You can get to a point where there's so many words spoken without any follow-up that the markets are like, yeah, whatever, I'll believe it when I see it. That happened with tariffs, and that was the right move by the markets, it's doing it now with the Iranian situation. It may be the right movement, it may be the wrong move. Clearly, Trump is looking for a way out. Whether he got snookered into this by Israel, who knows, I'm not a geopolitical expert, but clearly an escalation hurts the Republicans' chances in the midterm, those are now only six months away so that's very close, so they're looking for a way out. Maybe China actually provides that way out in some way and then that would be a win because then the market can just focus on, pull up slide 3, the earnings story. 

We have a CapEx boom and that is causing earnings to just explode. This is a chart I've shown many times where you see the growth estimates going into earnings season, which is that vertical axis there. Typically, those numbers kind of drift lower because companies want to under promise and then companies beat estimates and you get a bump, but we're getting a bump that is just unheard of, even though incoming waves are rising instead of falling. Clearly, this is the CapEx AI boom, it's the One triple B Act. Usually you get these kinds of strong numbers coming out of a recession, not in the middle of a cycle. The only analog to this, ironically, is 2018 which was Trump's first term, and that was the earnings boom coming out of the TCJA. If we go to slide 4 you can see that--

Pamela Ritchie: Christmas Eve. 

Jurrien Timmer: --we can see that for the annual numbers, the calendar year numbers. Again, earnings are just exploding higher. They were 11% ... earnings growth in 2022 when we had a bear market was 8%, '23 was -3, '24 was 11, '24, '25 it was 14, '26 is now 22% and rising. That's a really incredible wave. We're right at that 2018 number. Like you said, the irony of that is is that 2018 produced a 22% earnings boom but the market was down 4%. That tells you that valuation is important. That year, of course, we had volmageddon early and then we had Powell kind of pushing rates a little bit too high, too fast, and the markets had a 20% little mini meltdown, the Christmas Eve massacre it's called. Anyway, that's what the market is latching on. At the same time the bond market is pretty quiet. If we go to slide 12 you could see the 10-year yield continues to kind of sit in that tight range. The 30-year is knocking on 5%. 

Again, if this oil situation persists and it feeds into inflation and it makes the inflation rate more structurally elevated above 3%, remember the Fed's target is 2, there's no way the Fed can ease rates. That kind of puts a monkey wrench into the Warsh Bessent Treasury Fed record part 2.0 where they want to lower short rates, steepen the curve, deregulate the banks, make the banks own the Treasuries while the Fed is just laundering the T-bills that the Treasury is issuing. That could put that game plan at risk. A lot does ride on this because as we've said many times the 10-year, when it goes above 4 or even above 5 that's the danger zone where this whole fiscal order starts to get questioned again. You wanna keep that dragon sleeping in its cave and not rear its ugly head. There are a lot of pieces to the puzzle here. 

Pamela Ritchie: On the right tail risk discussion if, for instance, something calms the markets this week, we don't know if it's a meeting between China and the US but maybe it could be that, if oil prices come down the inflation threat calms, what do you see in terms of either money coming out of some of the hyperscalers and just tech generally and being able to spread itself through other companies because they're going to have less oil issues and inflation to deal with. Do you see a mini-rotation possible there?

Jurrien Timmer: I could totally see that. If we go to slide 5, this shows the cap-weighted S&P and the equal-weighted S& P. As we remember earlier this year we had this beautiful benign broadening, another triple B, where the Mag-7 kind of did nothing and the rest of the market was able to catch up. That's what you want to see. Breadth was strong. Then, of course, we had the Iran conflict. As always happens when the market goes down it becomes correlated so everything went down in tandem and now everything is back up, but you can see that the cap-weighted, the black, has vastly outpaced the equal-weighted, that's because of AI, while the rest of the market, like you said, is sort of held back by the oil and the inflation concerns. 

Yes, I could easily see that if oil went back, let's say below 90, and we see the numbers of ships going through the Strait of Hormuz really picking up from the low single digits that we see now to 20, 30, 40, then certainly I think the market could broaden in a very bullish way. Everything would kind of melt up. If you look at even the Mag-7 on slide 6, that's still looking really good. If you look at the Mag-7 and its earnings band, these are earnings estimates for the next 12 months, the 12 months that follow and the 12 months that follow that, you can see that the price kind of rotates. It goes from one extreme, it falls below that band, then it goes above it, and then it goes below it, we're not even at the middle point. Again, you can't call this a bubble, not yet, because earnings are totally dominating this story. 

It is interesting, not that you asked this, if we go to slide 7 it is interesting to see how the CapEx cycle is starting to move the needle on other things. As we know, the Mag-7 and other major tech companies have built up this giant hoard of cash over the years which they have been returning to shareholders in part through, obviously, dividends but especially share buybacks. Now that the cash is being used for CapEx you can see that the buybacks, the yellow, has been flatlining for a year now, even though the CapEx, which is the dark blue, just continues to go up and continues to follow earnings. There is a very subtle change in terms of what companies do with their cash. I don't think it really matters but, theoretically, if you look at a discounted cash flow model a lower buyback ratio should hurt valuations, it should bring them down. The valuation for the Mag-7 isn't that high, it's in the 30s. Of course, it would be a benign derating because if the earnings are booming so strong even if you go from 35 times to 30 times you're not really going to notice it because earnings are exploding higher. There's some little nuances there going on. 

Pamela Ritchie: Again, if reality changes in terms of oil prices and there are just other options you wonder if at some point because of that buyback and other reasons as well investors say, yeah, we've been patient enough, or something like that. 

Jurrien Timmer: What I would say, if we go to slide 14 for a second, the biggest thing you probably would see if victory is declared or mission is accomplished, famous last words from George W. Bush, of course, I think the biggest move ... you'll see a broadening but the biggest will actually come from the asset allocation side. I've been showing this chart, the horizontal is the correlation to long term Treasuries and the vertical axis is the correlation  to the S&P. You can see those two black lines kind of converging, that means that stocks and bonds are getting increasingly more positively correlated. They're now about 50% positively correlated to each other, that's because of this Iran conflict because it's driving inflation up which makes bonds not a good investment. At the same time these Gulf states have to sell assets to meet their cash flows because they can't ship their oil, gold and bonds have been the source of that cash flow. 

At the same time commodities, the BCOM down in the lower left, and managed futures, CTA, and the dollar itself have become increasingly more negatively correlated to both the S&P and long term yields. If there was a big reversal in the Iran situation I think this is where you would see most of the action. Bonds would become less correlated to stocks, maybe they would even go back to negatively correlated, commodities would go down because oil goes down and then that lower left would start to move back towards the middle where they usually are. For the 60/40 or the 60/20/20 I think it would have some implications at least over the short term. 

Pamela Ritchie: Where does oil and Bitcoin enter this conversation? I might just ask you specifically on Bitcoin. I think you mentioned in your note it's much more available but talk to us a little bit about the balance off the lows, what it's done, how much of that is connected to the fact that you can just, if you think it's a deal or an interesting entry point, investors now have available vehicles to go in and invest which they didn't a year ago, two years ago, it wasn't there. 

Jurrien Timmer: It's become a lot easier. If we start with slide 18 and then we'll move back, if we look at the periodic table, this shows the annual returns in 3-month increments, you can see that Bitcoin in the orange is usually either at the top or at the bottom but never in between. That's just Bitcoin doing Bitcoin. A few weeks ago it was at the bottom, today it's the second from the top. That's because Bitcoin has a lot of momentum as it builds out this little mild winter bottom. Commodities are at the top. In that scenario I think Bitcoin would do well. Gold would do well because, again, gold is now correlated to bonds because I think it's seen as a source of liquidity for Gulf states because it's a reserve asset. I think you could see commodities go down in general and gold and Bitcoin go up. 

If we look at the commodities chart which is 15, you can see that the Bloomberg Commodity Spot Index ... that's a beautiful chart, right? You had this long, long base and then this big breakout where new highs, 88% of the commodities in that index are in uptrend so you have very strong breadth. Clearly, if oil went down 10, 20 bucks this chart will get slightly broken. Maybe it's just a short term break but it wouldn't look as good anymore. Then you go into my two favourite sub-components of commodities, which is gold and Bitcoin. 

If we go to gold first on slide 16, gold follows the global money supply which keeps on growing. It's at $122 trillion now growing at 10%. The US money supply is not growing that fast but the global money supply is. You can see that gold is actually far below it. It should be at 5,500 if it was following that red line. I think it's underperforming right now because bond yields are elevated and gold, which normally shouldn't be positively correlated to bonds, now is because, again, they're both seen as sources of liquidity. Gold, I think, would catch up to the red line if peace returns to the Middle East. Gold would be a clear winner. 

Then you have Bitcoin in slide 17, which is a fascinating chart. I generally don't spend a lot of time on very short term movements for Bitcoin. I look at these big wave patterns. If you remember when it was above 100, when that purple trend line was broken at about 110,000, I said, okay, that wave is over, we're now in a winter. My target was 65, we went to 60. Since then it's been forming a nice base. You could argue that that peak at 126 was maybe a head and shoulders top and we're now retesting that neckline after breaking below it, if we go above that neckline I think a lot of people would say, wow, we're in a new bull market. You see in the flows in the bottom there, these are ETP flows into Bitcoin in the blue and into gold and silver in the yellow, you can clearly see that investors are now rotating, as they should be. 

Gold to silver, gold to gold miners, gold to Bitcoin, these are all substitutions for a hard money type of asset. For a while people were flocking into gold, selling their Bitcoin and now they're doing the opposite. I think that that could continue with some momentum. Like you said, investors have an easy way to buy it. They don't have to go figure out their wallets and their passwords, they just buy an ETP. 

Pamela Ritchie: Less headaches. A quick question. There's some great questions here, I'm going to wrap two together. The tariff refunds that are probably a little bit of a logistical nightmare but ultimately money should be coming back to companies, the other piece is the idea of tax rebates which are happening now in the month of May in the US. Just sort of put those into the story of the US economy for us right now. 

Jurrien Timmer: The US economy is in a strong mid-cycle expansion. It's been very resilient. Even the jobs numbers are getting better, more better. A lot of people are getting tax refunds. That will end soon because tax season's already behind us. That was a pretty big tailwind because the tax cuts last year, or the tax extensions were retroactive so people see an immediate relief on that. It's not showing up in consumer confidence because that remains at a low. The reason for that is that while economists and the Fed like to look at year-over-year changes that doesn't really mean anything for the average person who sees that since COVID whatever they're buying is now 30% more expensive, and the wages they're getting is not 30% higher from 2020. Even though right now wages are keeping up with inflation over the last five, six years they have not. What you're paying for is here, what you are getting is here on a cumulative basis. That's why the consumer confidence numbers are weak, also household affordability, things like that. 

The tax refunds certainly help. The tariff is a different story. It should be refunded but how do you figure out who to refund it to? We've always said, and the Fed has confirmed this, that 90% of the tariffs were paid for by someone in the US, not by China as Donald Trump likes to call it. Of that 90 60% is consumers, 30% is importers. How do you figure out where to send that money to? Now, it would be the importer, of course, that would get the refund but then they should refund their buyers. How do you even begin to do that? What Trump is saying, even yesterday he said it, well, we're not paying these tariffs back to China. He still thinks that it's the exporters and for him to say otherwise would be admitting that he just had really bad calculus in his head, or bad advice. I think they will find some way to not do it or make it go away. The American consumer who bore the brunt of this is not getting a refund for this. 

Pamela Ritchie: That's really good to sort of hear that. Just with our last minute how would you sort of leave this setup with these incredible right and left tails which you've been discussing, both very powerful, just walking into this week. What do we hold onto? 

Jurrien Timmer: That slide 13, I've been a proponent of some form of 60/20/20. It's done extremely well as you can see in the upper right, but I still think that having hedges against not only equities because if we do get a bubble or if the oil stuff does get bad you could see a drawdown, while at the same time bond yields would go up. You do want to have some protection in the form of maybe some cash or commodities or gold and Bitcoin, managed futures, things like that. They've been a very good place to hide here lately and, clearly, that can go the other way around, at least over the short term. That would be an opportunity to rebalance. 

Pamela Ritchie: It's been fascinating talking to you today. Thank you, as always. Good luck with your preparations for travel. Glad to have you here today. All the best, Jurrien Timmer.

Jurrien Timmer: Thank you very much. 

Pamela Ritchie: Coming up on Fidelity Connects over the next few days, tomorrow we feature portfolio manager Max Lemieux. He's going to be discussing the Canadian equity landscape, providing an update on Fidelity True North Fund. He joins us first at 10:30 Eastern, that's in French, and then 11:30 Eastern, regular time, in English. 

On Wednesday we're going to be speaking with Étienne Joncas-Bouchard. He shares the latest ETF flows, industry themes, kind of fascinating to see what happened to April. We'll be discussing that with Étienne first in French at 10:30 a.m. followed by English at 11:30 Eastern time. 

On Thursday, a deep dive into the growing influence of finfluencers and how clients are consuming financial advice on social media. Our special guest, Benjamin Felix, Chief Investment Officer and portfolio manager at PWL Capital, discusses what advisors really should understand about this overall shift. All of that ahead on Fidelity Connects. We'll see you in the days to come. Thanks for joining us here today to kick off your week. I'm Pamela Ritchie.