FidelityConnects: Jurrien Timmer – The global macro view October 27, 2025

[00:03:18] Pamela Ritchie: Hello, and welcome to Fidelity Connects. I'm Pamela Ritchie. Welcome to the most interesting year, 2025. 2025 has shown some fascinating correlations, some that we never would have expected, like utilities performance at the levels of the S&P 500 as sort of strange bedfellows vying for runner-up status in the bull market on a year-to-date basis. As the world this week prepares for more detail on a possible U.S.-China deal, a Fed move and trillions of dollars' worth of earnings to be announced over the course of the next five days, the markets power ahead. Can this power extend sustainably to the smaller cap or to equally weighted versions of U.S. markets, or is this the year for those massive tech giants to steal the spotlight again? How does the global bull market share the gains through the end of this year as well? Well, joining us here for a tour through charts and graphs that paint the picture of the market is Fidelity Director of Global Macro, Jurrien Timmer. Warm welcome to you. You're off travels, back in Boston. Nice to see you.

[00:04:21] Jurrien Timmer: After the conference in Palm Beach and then a road show in Toronto last week where I did five events in 25 hours I think I've gotten a good dose of Canada in the last couple of weeks, which is always a good thing, of course.

[00:04:34] Pamela Ritchie:  I think you just left just before it started to get cold, basically got cold last night so good timing on that part. We're delighted to have you to sort of sum up what we've seen thus far. Here we are at the end of October and it has been a very odd year. Tell us sort of some of the pieces that you're putting together that just seem strange and new.

[00:04:56] Jurrien Timmer: On par for 2025. We kind of knew this was going to be an interesting year just given the election dynamics at the end of last year. If we just go to slide 1, it's just such an interesting juxtaposition of what is and isn't working this year. We have gold miners and Bitcoin-sensitive equities kind of in first place. It's just really interesting. You could argue that they're cut from the same cloth, they're both mining two hard assets that I've been a big fan of for a number of years. It's just interesting to see them up there. Then you've got nuclear, the nuclear theme, you've got the meme stocks, you've got gold, you've got non-profitable tech, retail favourites. European banks, okay, where did that come from? It's just a really interesting mixture. It's nice to see because it's nice to see such disparate assets and sectors able to do well at the same time. European banks and nuclear stocks, who would have thunk it?

[00:06:13] Pamela Ritchie: Absolutely. It's absolutely fascinating how these work out together. We were looking for diversification from the Mag Seven. The Mag Seven continues to power ahead and we're asking that question, is it yet again a year for that being the story? People will argue both ways but it looks pretty good at this point. I guess it's sort of the secondary story, isn't it, all these different pieces that are working and emerging in some ways. What's not emerging? What do you find sort of is being left out, actually, of this slightly new year?

[00:06:47] Jurrien Timmer: I would say the two sectors that are most notably absent from any kind of animal spirits are real estate in terms of REITs, not necessarily the asset itself, which tend to be a bond proxy. Utilities tend to as well but utilities have this whole nuclear theme going on, at least some of them. The REITs are just down in the dumps, and energy stocks. Those are the two, maybe pharmaceuticals as well. There are some sectors that are left behind but that's always the case. You're not going to have all 11 sectors outperforming. Mathematically you can't have that. What I like a lot is the global nature of this bull market, or how it has turned global. If we go to slide 4, we'll start with the U.S., if we go to the slide 4 you can see earning season really having a lot of momentum. We now have 150-ish companies reporting in the S&P, about 85% of them beating by about 8 percentage points so a very, very solid number. You see in the black line there that bounce, and that's only after two weeks. We have, I think, 44% of the index reporting this week. wo we'll get the big tech names and we'll a lot of other bellwethers.

[00:08:19] But if we go to slide 5 you can see that this is a global phenomenon. The grey line is the U.S. and the other lines at the top are non-U.S. developed, emerging markets, et cetera. The bottom panel shows the year-over-year relative return of the MSCI  All Country World ex-U.S. to the U.S. You can see that we're now ... non-U.S. stocks are really holding their own despite the very concentrated nature of the S&P and the Mag Seven dominance etc. It's nice for us investors, and all the investors watching, that we have a bigger pond to fish from. That's a good thing. You don't want your whole performance just to come down to seven stocks in the S&P. That is not a comfortable way to have to invest.

[00:09:19] Pamela Ritchie: There's an interesting sort of narrative months ago in Canada about tariffs being a gift because it sort of forced Canada, and other countries, lots of other countries across the globe, to kind of dig in and do what they needed to do in their own economies. You wonder if the slide in April 2nd was sort of the gift to the global markets as well that have been waiting there at those valuations. They were value traps before but maybe not now.

[00:09:47] Jurrien Timmer: I do agree with that. You look at Europe and NATO and, of course, Canada is not part of that but generally speaking, the U.S. was so dominant for so long, since World War II, that everyone just sort of maybe got complacent or have some inertia that, okay, well, the U.S. is going to fix our problems so we just kind of hang out here. Clearly, April 2nd, and independent of that the NATO talk, there was that NATO conference in June, I think that's been sort of a kick in the pants for the rest of the world to say, okay, we've got to make our own stuff happen. I think, that's a good opportunity. I think what we're seeing in the weaker dollar and better performance overseas and that value differential finally getting ignited because you have a good fundamental catalyst now, I think it's very, very important.

[00:10:52] We have our PMs going around the world and what they're noticing is that international companies, even if they're not growing by leaps and bounds they're getting much more savvy about unlocking shareholder value. Again, the European banks, one of the top leaders of the year, it's because they were so undervalued, they were trading at a half times book, and then these companies, these banks started to get smart and they started buying back shares to kind of wake up their balance sheets. Now they're trading at one times book. That's a big improvement, and they're still cheap. Again, they don't have 20% earnings growth but they don't need it because they have all these dormant assets that they can wake up. That's been a big part of the story for Japan and Europe.

[00:11:44] Pamela Ritchie: It's fascinating how that works. You've discussed before and brought to our attention just sort of the amount of liquidity that's out there. That's caused lots of problems as well as opportunities but because there is so much liquidity and there's just money sloshing around, essentially, around the world has that allowed for maybe from an equity perspective to be room for everyone? You sort of think if there is this international trade it's got to come with a cost of the U.S. Of course, it isn't right now. The U.S. is doing incredibly well in equity markets. Lots of people shifted right back to that trade. Is there an element of there's room for everyone because markets are very, very liquid globally at this point?

[00:12:24] Jurrien Timmer: I's a great question. To some degree I guess it's a zero sum game that if money is going to overseas markets it's not going somewhere else. But it also could be that this is new money. Fund flows have been positive and, like you said, the liquidity cycle does create new wealth. It's interesting, if you go to slide 2, that's just a daily chart of the S&P. It made a new all-time high on Friday and it's making one again today. If you look under the surface at the percentage of stocks in the S&P that have positive price momentum, an RSI greater than 70, you can see that it's only 5%. There is not a lot of juice in the market, it's just that the Mag Seven continued to dominate. Maybe money rotating to international stocks is coming at the expense of, let's say, the down-cap parts of the U.S. market.

[00:13:28] My sense is that it's a re-risking, money is coming out of maybe other pockets of the market, maybe the bond market, what have you. Certainly, this is a global phenomenon and you could even argue that it's getting to a level of froth, not a bubble, not yet at least, but we can certainly talk about how maybe some of these strange bedfellows that we talked about earlier are in part a function of risk appetites really getting stronger.

[00:14:01] Pamela Ritchie: Let's talk certainly about that. The risk appetite is often tied to the AI trade and the utilities are tied to the AI trade because how are you going to power it all. Yes, what is getting to a point that is fully realized in the price, I guess, is the question. Many will argue that the valuations for the Mag Seven plus have real reason to be at those levels but utilities? Tell us about some of the other parts of the market that maybe you've seen this [crosstalk].

[00:14:29] Jurrien Timmer: Certainly, this has been a top of mind question that I've had from ... again, I was in four four cities in the last two weeks and certainly it's a question that everyone asks. I did a bunch of media interviews, again that's the question people ask. If we go to slide 11 you do see some signs of froth which tends to happen you know after a bull market runs enough. At this point. It seems kind of unstoppable. The Fed is sort of on the bull side, bond yields are fairly low at 4%, earnings are accelerating. Again, this chart is a new one I just made and it shows a bunch of different sectors and regions.

[00:15:15] Pamela Ritchie: This is amazing.

[00:15:15] Jurrien Timmer: Some of these are thematic baskets that Goldman Sachs creates and you can see Bitcoin-sensitives trading at 107 P/E/. Meme stocks at a huge multiple. I guess the people who buy meme stocks are not concerned about valuation. They're not value players, they're momentum players. Recently issued IPOs, nuclear stocks, AI, various themes. Then you have the S&P there at 25, which is not cheap, and the Mag Seven at 33, which is not cheap but you could argue given the size of these companies and the amount of growth that they are experiencing 33 times expected earnings isn't really that onerous.  Then you've got MSCI emerging markets at 15 or so, EAFE at 16, 17. It's an interesting backdrop but that's the menu. There's a lot of things going on.

[00:16:16] You mentioned the Mag Seven, if we go to slide 12, just to address the question about bubbles. I've studied bubbles all my career and I've certainly studied the one as it was happening in the late' 90s. Bubbles happen a certain way. They're not rational so if you put a rational view on it saying that, okay, this is overdone or the P/E said this you're probably going to miss some of it, assuming you're playing in the first place. Generally, people get very skeptical way too early and then the bubble goes much further than they expect and then they'll jump back in because they have FOMO and then that's the top and they ride it all the way down. That's literally the definition of a bubble, otherwise if people didn't jump back in because of the FOMO you wouldn't have a bubble. You would just have a bull market that ends.

[00:17:11] Looking at, okay, where are we, what can we learn from the past? I covered this in the last few weeks, the 2022 bear market was very similar to the 1994 stealth bear market when Greenspan raised rates. Then '95, '96, '97, most of '98 was a very strong bull market, kind of sparked in '95 by the launch of the Netscape IPO that was kind of the the start of the internet boom, if you will. Then 2022 was the bear market here and with '23  and '24 and the beginning of '25 was a very strong bull market, almost a doubling of the S&P 500. Late 2022 was kind of the bell ringer for the start if the AI boom because that's when ChatGPT was launched.

[00:18:07] If you then fast forward to '98 and '25, 1998 was the long term capital management debacle, it was an exogenous shock, say that 10 times, that caused a 22% decline in the S&P. The market came roaring back and even though it was making new highs and there was no sign of a recession or anything like that Alan Greenspan cut rates three times and we ended up with the internet bubble, not to lay blame at his feet for that but certainly it added some fuel to the fire in terms of easy money liquidity. Then we go to the tariff tantrum in April 25 and then the rapid recovery from there, you can see the overlay there in the chart. Then Jay Powell cut rates a few weeks ago and the expectations are that he's going to cut rates two more times this year.

[00:19:07] Pamela Ritchie: On Wednesday.

[00:19:08] Jurrien Timmer: You see the parallel but then kind of that's where maybe the parallel ends a little bit. If you look at the pink line in this chart, that's the P/E ratio for Cisco Systems back in the '90s. That was sort of the poster child of the AI boom. Cisco was then what Nvidia is today. You went from a 43 P/E all the way to a 214 P/E at the top in 2000. You compare that to Nvidia, if you take the trailing P/E it's gone from 32 to 55, the forward P/E from 16 or 18 to 33, doesn't mean it's not going to 200 but it certainly isn't there now. That's why I think that the talk of a bubble is understandable. If it is a bubble I think it's very, very early still in that stage.

[00:20:02] Just to kind of make that point one more time, if we go to slide 13, and I showed this chart last week, if you take the SPAC Index today. SPACs are special purpose acquisition companies, they're like hedge funds or funds that say, give me your money now, I'll find a place to invest it, it can be different things at different times but right now it's somewhat of a catch-all for anything AI related. If you index that from late 2022 when the AI boom, I think, legitimately was recognized and you index that to the same time and the same price as the Netscape IPO back in '95, you draw the line forward you can see that again, if we are in a bubble, and I'm not saying we are, but if we're we have not even begun to do that really parabolic move. Maybe this is all going to get really, really interesting, or maybe it won't, but that's my sense of where we are in terms of if we're in a bubble that it's early, very early days still.

[00:21:16] Pamela Ritchie: Nothing of what you're saying, which fits with sort of end of cycle if that is what it is, fits with a muddling through thesis. There doesn't seem to be a thought that we'll just sort of track along. It's a powerful force that seems to have the ability for further melt-ups if that's what you want to call it but it's not sort of a we'll plod along here and it'll be fine situation. It seems a bit of an either or.

[00:21:44] Jurrien Timmer: There's so many cross-currents. We have the whole tariff thing. Of course, there was some good news coming out of China with the APEC meeting, that's why the markets are on fire today. There's also bad news and you all are in the crosshairs of it. Our work shows that only 10% of the tariffs are borne by exporters and 90% are going to be borne by someone in the U.S., either a company through lower profit margins or a consumer through higher consumer prices. We have a 3% CPI print just coming out last week. Then you have the One Big Beautiful Bill, that clearly is stimulative, you have deregulation, you have extensions of tax cuts, you have the expensing, the bonus depreciation. Then, of course, you have the whole AI boom and that really is the biggest one. I mean trillions of dollars are being spent.

[00:22:42] Hopefully, it's not an overspend or a mal investment. There's a lot of money being spent on something that, hopefully, is going to change our lives but you run the risk of it being you know a misallocation of resources because right now everyone is in this race to the finish  I think, generally speaking, the economy is okay. The jobs market has been soft but if you look at the labour supply versus labour demand they're pretty much in balance. Again, then you look at the Fed, if we go to slide six, the Fed has a bias to ease and at this point the market's expecting the Fed to go to 3%. That seems a little low to me but Powell himself has basically said he's worried enough about the jobs market that he could cut two more times this year.

[00:23:40] The Fed is at 4 1/8 now so that would bring it down to 3 5/8. The irony is that inflation just printed at 3 which is a full per cent above the Fed's target but because it wasn't worse the market applauded this as a great win and giving licence for the Fed to ease further. I have to scratch my head. It shows you that 3 is the new 2 when it comes to inflation. If we look at slide 7, which is the bond market, the bond vigilantes are napping somewhere. The 10-year yield's at 4.

[00:24:17] Pamela Ritchie: They're okay with this.

[00:24:19] Jurrien Timmer: Yeah, they're okay with it. You look at valuations for bonds, for equities, you look at the Fed, you look at the term premium, you look at earnings revisions and it's nothing but green shoots. Of course, it's never that simple. It's when it seems that obvious that you have to wonder what can go wrong. The left tail would be really a significant slowdown in the economy, those jobs data. The right tail would be a bubble. If it's one thing we know in 2025 we're generally lurching from one tail to the other and we're not spending a lot of time in the middle of that bell curve.

[00:25:07] Pamela Ritchie: Then there's sort of the flying blind discussion, there isn't employment data because of the shutdown right now. You've spoken in the past how they're getting around that with alternative data and so on. The Fed seems primed to do this because they were worried enough about it with data that came out, essentially, a month ago on the unemployment picture and they don't expect that to go in a different direction so they're going to cut. Is that about right?

[00:25:34] Jurrien Timmer: Yeah, and again, we do have data. You have the state published data, you have jobless claims, those are generally quiet. There's the ADP data, there's the JOLTS data, those are all privately generated. Even we at Fidelity, we have some big data because we administer so many health plans that we can see whether companies are increasing or decreasing their payrolls. Even we have some proprietary data where we can say, okay, the jobs market's not falling off a cliff. The jobs data that were available at the time, the non-farm payroll data, were soft-ish enough, especially with that benchmark revision that the Fed is saying... in the Fed's mind they're still above neutral. I would disagree with that.

[00:26:30] If you look at the Fed's summary of economic projections, they have the long term neutral rate at 3%, and that's based on inflation of 2 and a natural rate of 1. Inflation is 3, not 2, so really neutral should be 4 but the Fed is not going to say that. They can't say that, they're going to stick to their guns and say they will get inflation down to 2 because if they ever say that they can't get it down to 2 the markets would immediately reprice the markets in terms of kind of a loss of credibility for the Fed. They kind of stuck with that and and so they're going to say 3 is neutral but we'll take our time to get there. That's why I think that after another rate cut or two this year Powell will remain data dependent. He's only going to cut further if the jobs market or the inflation rate goes down.

[00:27:27] Of course, his days are numbered. He leaves in May. As we were talking before the show Scott Bessent has already released a list of candidates. As the markets or the administration gets behind one person my guess is that person's going to become a lot more vocal and sort of becoming a shadow Fed chair, if you will, saying that this is how he thinks it should be. We'll have some theatrics around that but right now it's, actually, been very nicely quiet mostly because Jay Powell is moving in the direction that the administration wants, maybe not fast enough but it's moving in that direction.

[00:28:13] Pamela Ritchie: They're somewhat on the same choir sheet there, at least for now. A couple of questions. One of the interesting things that's been strange about 2025 certainly has been gold and where it finds its parallels also with Bitcoin. Here's a question, what are your thoughts on the gold rally, does it have longevity? It's come off a bit. I think you used the word baton's been shifted, handed over.

[00:28:39] Jurrien Timmer: Let's go to slide 15. I remain a bull on gold as well as Bitcoin. If you compare the growth in the global money supply, which is about $115 trillion, and you look at the price of gold you can see that it sort of overshot, if you will, and gold got caught up in the momentum trade. People buying gold, the gold ETF. The central bank's buying gold but then it gains a life of its own. You could argue at $4,400 it probably went about 10% too far. If you look at that chart, probably should have stayed at 4,000 but it went beyond, as happens. Now you're in a correction. Where is it going to bottom? We're below 4,000 right now. It wouldn't shock me to see it go to $3,500, which wouldn't be fun because we're probably all in it, but I would certainly buy more if it got there.

[00:29:47] In the meantime, if we go to slide 16, you can see the same pattern that we've seen now for quite some time, and that is that gold and Bitcoin are taking turns leading the charge as hard money. I think this is really great to see, actually. As I've mentioned in the past gold and Bitcoin have a negative correlation to each other. If you look at the Sharpe ratios in the bottom you can see that. They take turns. They're different players on the same team but they don't play at the same time. I that's what we want to see. If you have a bucket of hard money in a portfolio, whether it's 5% or 10% or what have you, I'd rather see them take turns than all move up and down at the same time because that's better for the overall volatility.

[00:30:39] At the top you see there that disconnect between how much gold ran and how little Bitcoin did. It's not surprising to me that Bitcoin is up 1.5% today and gold is down 3%. That will run its course maybe for a month or two and then we'll probably see the opposite happen. If you're trading oriented you can play this as a pair trade. I don't, I just see it as one big bucket of hard assets and I just have a little bit of both.

[00:31:08] Pamela Ritchie: That's absolutely fascinating. There's a question on that. Another question just back to earnings for a second. This is the broadening out question. Do you expect earnings to broaden out across more sectors or just sort of a broader trade on the earnings front? Interest rates are lower. There's sort of that question for smaller companies and a broader trade.

[00:31:30] Jurrien Timmer: If we go back to slide 4, it is broad. We have 150 companies reporting, 85% of them are beating estimates. Clearly, it's not just seven stocks. It's 85% of companies but they're growing their earnings, of course, at different rates. I don't have this chart this week but if you look at operating margins, it is definitely just a large-cap story. The large-cap margins are growing, they're about 15, 16%, and mid and small-caps margins are stagnating at around 5, 6, 7%. It is a world of haves and have-not  but I do think that there is breadth in the earnings data. You look at the numbers of revisions, etc., and again, it's not just the U.S., it's global as well now.

[00:32:26] Pamela Ritchie: It's an amazing story and it continues as we begin this week with you. Jurrien Timmer, thank you very much for joining us and look forward to seeing you soon. Have a good week. That's Jurrien Timmer joining us today from Boston, back from some of his travels. Coming up tomorrow with live French audio interpretation we speak with portfolio manager Darren Leckerkerker. This is to mark a decade of North American Equity Class and in this special webcast Darren is going to reflect on the fund's journey, explore today's market landscape and also a look ahead at what the next decade could well bring.

[00:32:59] On Wednesday we'll shine a light on Fidelity portfolio intelligence. This is analytics and optimization. These are tools to help advisors align investment portfolios to their clients' goals. Ben Romulus, he's portfolio strategist, he first joins at 10:30 a.m. Eastern Time in French. Then there'll be another webcast joining me at 11:30 am Eastern Time, it's Cam Chamberlain, he's Director of Portfolio Solutions. He'll go into the discussion of this intelligence tool, how the team works and what the team is hearing from advisors, the trends that they are seeing across portfolios. Very interesting data to share.

[00:33:39] On Thursday former TD Bank economist, Don Drummond. He's back to break down the latest Bank of Canada interest rate announcement and what ultimately it means for inflation, industry trends, financial markets. This conversation will have live French audio interpretation. Thanks for watching and joining us here to kick off your week. I'm Pamela Ritchie.