As Fidelity Investments strives to provide quality financial expertise to those in search of it, it’s essential to keep an eye on what’s coming next.
ETF Trends spoke with Denise Chisholm, Sector Strategist for Fidelity, about 2020’s potential. Specifically, she was asked about the continuation of the rallying equities, with all of last year’s global stimulus, and where are things currently.
Chisholm feels the outlook for the year ahead is broadly constructive. By building on prior drivers of performance, there are some leading indicators suggesting that earnings are not only inflecting higher but likely to surprise to the upside.
Keeping An Eye On The Index
She goes on to explain that she watches two indices. The NFIB Small Business Optimism Index and the OECD Broader Based LEI, as they confirm a turn higher that statistically lead S&P earnings growth by 1-2 quarters. Given the sharp deceleration from high double digits to near zero over the last year, it’s likely in 2020 for the story to be the opposite. Earnings can begin to reaccelerate.
Chisholm states, “As much as investors want to know the level of earnings, the top three quartiles of perfectly forecasted earnings growth all carry the same odds of a market advance.
“What’s more significant than the level, in terms of odds of equities and sectors on a go-forward basis, is the inflection point that we could potentially be beginning to see, which is the acceleration from a decelerating trend, especially right around zero. That inflection point carries 90% odds for the market.”
She would continue by explaining how the focus should be towards those more economically sensitive sectors that she’s focused on in previous Quarterly Sector Updates. Specifically, that focus has been towards technology, consumer discretionary, industrials, and financials.