Conservative Investments Lead the Market in 2016

March 20, 2016

After high market volatility in 2015, it is not surprising to see that investors are favoring conservative investments in 2016. We’d like to highlight here a trio of conservative sector funds, which show improving relative strength compared to the S&P 500 index.

The Fidelity Select Utilities Fund (FSUTX) returned an impressive 14.5% in the last three months, surpassing the 2.77% return by the benchmark Fidelity Spartan 500 Index Fund (FUSEX) in the same period:

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The Fidelity Select Telecomm Fund (FSTCX) is at a new all-time high level and returned 10.17% in the last three months:

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The Fidelity Select Consumer Staples Fund (FDFAX) reached an all-time high too, and returned 6.32% in the last three months:

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Read more about investment strategies at FidelitySignal.com.

 

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Real Estate Funds at All-Time High Levels

March 20, 2016

A stealth rally is under way in real estate equity and income investments, while most of the financial media is focused on developments around oil and other natural resources.

The Fidelity Real Estate Portfolio Fund (FRESX) is now at a new all-time high level surpassing the previous high reached in January of 2015:

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Our favorite investment in this space is the Fidelity Real Estate Income Fund (FRIFX) that is also at a new all-time high:

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Read more about investment strategies at FidelitySignal.com.

 

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Best Bond Funds for 2016

March 20, 2016

After the market turmoil in the second half of 2015, new trends have emerged in 2016. One of the important new trends is that the long-term Treasury yield index reversed direction and going lower:

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Lower long-term interest rates coupled with the strengthening U.S. economy makes bond investments attractive again. The Fidelity U.S. Bond Index Portfolio Fund (FBIDX) is a great way to participate in the new investment environment, because FBIDX invests in both Treasury and corporate bonds.

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One of our long-term favorites is the Spartan Municipal Bond Fund (FHIGX). This fund has been making steady gains since October 2015 and we believe that the improving economy should continue to strengthen the credit worthiness of issuers and increase demand for municipal bonds.

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Read more about investment strategies at FidelitySignal.com.

 


International Markets in Turmoil – Part 2

October 1, 2015

Summary:

  • The German equity market is in a downtrend with negative impact for Europe
  • The bear market in natural resources continues to pressure Latin American and Asian markets
  • In our opinion, international markets will continue to decline and should be avoided in the near term

In our June blog post we warned about the rise of geopolitical risks and their impact on international markets. In the summer, one of the main concerns was the potential exit of Greece from the Euro Zone. While the exit did not happen, the continued weakness of the Greek equity market (GREK) shows that Greece is not yet in a better shape than before, and it is likely that the question will have to be addressed again in 2016.

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Our current concern is the weakness of the German market, which is the largest and strongest economy of Europe. To illustrate the concern, lets take a look at two German bellwether stocks, Volkswagen (VLKAY) and Deutsche Bank (DB).

The chart below shows that the highly publicized “Dieselgate” emissions scandal has caused a more than 50% drop for the Volkswagen stock so far. With litigations just starting up and the recall for the diesel cars still not available, we see the weakness to continue for the near term. The chart of Deutsche Bank is also very bearish with a recent technical breakdown below the support level.

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The chart of the German equity market shows a similar negative pattern:

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Besides the weakness of the German market, Europe has two additional problems that will have to be resolved before we can turn bullish again. The first is the concern about the effectiveness of the quantitative easing program with the ECB starting to hint again at the need for a new round of money printing. The second concern is the economic impact of the flood of immigrants and the political tensions it created in the Euro Zone.

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Our second topic is the impact of the bear market in natural resources, such as oil, on emerging markets that are net exporters of raw materials. The chart of the Fidelity Natural Resources Fund (FNARX) shows that the bear market resumed in late summer and downside volatility is very high:

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It is not surprising to see that equity markets in Latin America and in Asia are also in a steep decline:

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Visit FidelitySignal.com for investment strategies involving Fidelity mutual funds.


International Markets in Turmoil

July 8, 2015

Geopolitical risks are on the rise again with weakness in European markets due to the intense negotiations around the potential exit of Greece from the European monetary union. The negative performance of the Greek stock market reflects the uncertainty about the outcome of the negotiations:

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In addition to Greece, the sudden and dramatic selloff of Chinese stocks has the potential to destabilize international markets. A-shares, which are traded in Mainland China at the Shanghai and the Shenzhen Stock Exchanges, are impacted the most, while shares in Hong Kong are holding up relatively well:

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As the result, most Fidelity mutual funds that invest in international markets are no longer trending higher. Examples include the Southeast Asia Fund (FSEAX), the Emerging Markets Fund (FEMKX) and the Diversified International Fund (FDIVX):

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In our previous article we wrote about the potential of the natural resources sector to further rally and to provide market-leading results in 2015. Unfortunately the selloff in the Chinese market, which is a major consumer of commodities, caused an unexpected reversal. The chart of the Select Natural Resources Fund (FNARX) shows the sudden reversal of the emerging bullish trend:

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Visit FidelitySignal.com for investment strategies involving Fidelity mutual funds.

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5 Top Fidelity Mutual Funds to Watch in 2015

April 16, 2015

Summary

  • A technical screen of Fidelity mutual funds shows that new investment areas emerged in 2015 to lead the market
  • The natural resources sector, which includes energy, has the potential to provide market-beating returns. On the other hand, investors shouldn’t expect low volatility, because commodity prices can fluctuate in a wide range
  • International markets, most notably Asia and Europe, may outperform U.S. equities this year

From time-to-time, it is important to take a broad view of the market, so we can better understand the changing conditions and dynamics. Five month ago, back in November 2014, our momentum screen showed that the top 10 Fidelity mutual funds were all equity funds representing the consumer, health care and transportation sectors of the U.S. economy (see article).

While equity funds continue to outperform bond funds, the picture is very different now. Mutual funds investing in energy and other natural resources, and international markets are the market leaders. At the same time, select U.S. sectors, such as utilities, are lagging:

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Speculation about bottoming oil and commodity prices have caused an impressive rally in the natural resources sector. A great way to participate in the potentially long-term bullish trend in this sector is via the Fidelity Select Natural Resources Fund (FNARX).

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The Fidelity China Region fund (FHKCX) is now the best year-to-date performer of all Fidelity mutual funds with a 20.97% gain.

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Visit FidelitySignal.com for additional investment strategies.

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Emerging Investment Opportunities in International Markets

April 12, 2015

Quantitative Easing in Europe and in Japan has started to make a positive impact on equity prices in developing markets. In our view, one of the best ways to participate in this long-term trend is by investing in the Fidelity Diversified International Fund (FDIVX). FidelitySignal issued a BUY signal for the fund on February 8 and the fund was included in our Diversified Model Portfolio, as of that date.

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The potentially stabilizing U.S. dollar and commodity prices, and the prospect of world-wide economic recovery in 2016 are making emerging market investments attractive again to investors seeking growth.

The Fidelity Southeast Asia Fund (FSEAX) provides a solid way to participate in the Chinese and other Southeast Asian markets. FidelitySignal issued a BUY signal for the fund on January 23 and the fund was included in our Aggressive Growth Model Portfolio, as of that date.

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For investors seeking broad diversification across emerging markets including Southeast Asia, Eastern Europe and Latin America, the Fidelity Emerging Markets Fund (FEMKX) is our top rated choice. FidelitySignal issued a BUY signal for the fund on April 7 and the fund was included in our Megatrends Model Portfolio, as of that date.

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Visit FidelitySignal.com for additional investment strategies.

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