FidelityConnects: Denise Chisholm: Sector watch – March 26, 2026

Denise Chisholm, Director of Quantitative Market Strategy, brings her unique insights and perspectives on the sectors to watch in global markets.

Transcript

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Hello, and welcome to Fidelity Connects.

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I'm Pamela Ritchie. It's been another volatile week for

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equity markets with sentiment on edge amid heightened

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geopolitical tensions.

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Many are asking is this the start of something more serious?

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Our next guest says when fear is high markets have

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historically climbed higher.

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In a changing energy world those shifts may be

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less dampening and more supportive, actually, than they

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appear. Joining us here today to put all this into

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perspective and to highlight where she is seeing

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opportunities across sectors is Fidelity Director

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of Quantitative Market Strategy, Denise Chisholm.

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Hello, Denise. How are you?

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Hello, Pamela. I am well here in Boston.

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Duxbury.

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It's great to see you. We'll invite everyone to send their

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questions in for you over the next little bit.

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Let's unpack a little bit what's in the intro there,

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the discussion of even though there's fear, having

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oil prices spike, we're seeing it, we all know why, why

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can the market sort of climb higher than the fear itself?

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How, ultimately, historically does that work?

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I think there are a bunch of different ways to tackle it

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because, obviously, we have something very different going

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on this time. That's the irony behind any historical

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analysis, it's always different.

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We have to be careful as investors what we think we know

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about what outcomes mean.

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The knee-jerk reaction is if there's any stress, if there's

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any geopolitical risk, if there's a risk to the overall

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economy, then therefore equity markets are

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at risk as well, which is always true in their

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own nature, which is not to say that corrections and

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recessions don't happen, but studying history can help

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you understand how often that

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leads to a linear conclusion.

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When you study, especially, wars and conflicts going back to

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Pearl Harbour, even through Russia invading

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Ukraine, you actually find an odd situation.

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From the time that either the bombs start flying or

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the boots hit the ground for the next year

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equity returns on average are 8%.

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It goes up 70% of the time historically, which is

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basically in line with the average.

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I think you have data point number one as an investor, be

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careful what you think you know because the glaring

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data from history says that more often than

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not things like this don't affect long term equity

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market returns.

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It's so interesting, and does it depend, we hear from

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everyone it depends on how long it lasts for.

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Here we have the spike, the question is does it last

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for, I don't know what, two months, three months, how long,

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ultimately, until a longer term impact is

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unavoidable?

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That's the right question. The right sort of question

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back to me is, Denise, when you average all the conflicts

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together that doesn't include the ones that involve oil

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prices specifically. Look what happened in 1973 with

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the oil embargo. That very clearly led to a recession.

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Again, back to the let's go through what is

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quite different this time relative to the 70s, because I

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think we need to push back against the stagflationary

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expectations that I'm already hearing, and then let's talk

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about the duration and the math associated with what we have

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potentially going on.

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The first aspect is what's different than the '70s.

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In the '70s, the late '70s and early '80s, in the mid

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'70s, oil was a much bigger portion of our economy

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and the consumer's wallets.

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If you looked at everything consumers spent on energy, goods

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and services as a percentage of their overall income it

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was about 8%.

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Now we're down to 3.

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That is how efficient our

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economy has become in terms of how

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much oil needed for generating wage growth

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or generating economic growth.

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It's not to say that higher prices of the pump don't crimp

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real income growth but it is to say the throughput

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in terms of how it affects the consumer or the

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economy is very different than it was in the '70s.

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The supply situation is also different.

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At the time in the '70s OPEC was producing

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2X the OECD in terms of

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barrels of oil. Now it's actually on par and

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that's a product of US shales.

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Now for the first time in modern history the US

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is actually an exporter not a net importer.

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Which is all to say that, of course, this all matters

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but I think you have to understand that the context is very,

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very different in terms of the impact to the overall

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economy. In some ways we just saw this with Russia and

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Ukraine. We had one of the biggest supply shocks we ever

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saw. We did see the same kind of

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spike in oil prices and yet we didn't have a

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recession.

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Which explains part of the reason why the Brent price is

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skyrocketing in a different way than WTI because the

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international market is more exposed to this and more

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worried that, ultimately, they don't have a solution in the

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same way as perhaps the US and North American markets,

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ultimately, do.

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You've mentioned before that it sort of depends

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when an oil shock happens in an

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economic cycle. If it happens when everyone's able

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to make most of their bills and they're in an okay,

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comfortable spot it's just less dramatic

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to the overall consumer and to an economy and

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they can kind of bump their way through it.

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We're okay right now.

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The economy is okay.

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There are signs that you could make a bear case in a lot of

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different directions but does that have a lot to do with

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how, ultimately, we can sort of swallow this moment?

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It does. I think that's the exact right way to think about

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it. It's interesting when you look at the data.

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Forget the geopolitical risk which is more

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noise than signal, at least from a long term term

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perspective. Let's look at oil price spikes historically.

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We're up, let's call it 50% or more

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over the course of a two-month period.

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Let's screen all of history and say, well, when that has

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happened what has happened to consumption growth on a

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coincident basis, what's happened to corporate profits?

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You find something odd, which is to say that it hooks up

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because more often than not, which is, obviously,

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not to say every time, you see rises like that

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in an increasing demand environment.

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You saw it coming out of COVID, you saw it coming

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out of the financial crisis, and you saw it coming out of

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'99, right when oil prices were as low as

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$9. That is not our situation but what it shows

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you is you can't hold all else equal because, to

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your point, there are offsets.

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Think back to what happened last year.

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We talked about tariffs, how much are tariffs going to be,

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how much is going to land on the consumer?

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Is there an offset, is it going to be enough to be a tipping

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point for the consumer? At that time the offset was lower

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oil prices.

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We thought by estimate that tariffs

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might cost the US consumer $250 billion.

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Oil prices were likely to give the consumer $250

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billion because they were going down about 30% year-on-year.

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We are right now, if you try and do that math, completely

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flipped.

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It's almost like it was planned.

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Right. Tax rebates on an annualized basis, not just the

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rebates themselves that are incremental, whatever rebate,

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but the decline in withholdings on the tax cuts from last

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year, probably totaling something like 150 billion.

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You add in the reduction of tariffs, ironically

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while nobody's looking going from a 13% effective rate to

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right now it's like an 8% effective rate, potentially going

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lower, that's another 50 to 60 billion offsetting

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the drag from higher energy prices which, let's say, on an

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annual basis are totaling 150 billion right now.

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The question, and I didn't answer your original question and

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I should answer it, is, okay, well what's the level and

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what's the duration?

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From a duration perspective, let's tackle this same

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thing historically speaking, when do you see that

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typical demand destruction?

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Well, you see it usually when you hit 5%

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of your income. You say no mas, I don't have any other

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things to spend on anything else, this is hurting my real

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income enough that there is a tipping point.

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That, on a price basis for oil, is

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somewhere, depending on how it all filters through,

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between 135 and 150.

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It's higher than you think, perhaps, and it's higher

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than where we are now.

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That has to be sustained when you look through what's

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the filter through to inflation, which will

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create the crimp in real income, it's not

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a clear pass-through for anything that only lasts

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six months or under.

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Meaning, if the linear math is oil prices spike

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therefore inflation spikes therefore real incomes

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decline, and we can get to the Fed in a second, therefore

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that's the recession risk.

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If you look at oil price spikes from a magnitude perspective

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what you find is you have lower than 50/50 odds that

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core inflation reaccelerates.

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You can only get something above 50/50 odds

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if it lasts 9 to 12 months.

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That's not to say the odds are zero but it is to say

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that there is not an automatic pass- through,

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historically speaking.

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For instance, companies that are thinking about what they

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need to say in the next round of earnings conference calls,

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weeks away at this point, might not

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actually see it in anything that's going on with their

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company yet.

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A Fed cut or hike traditionally takes, what is it,

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18 months, a year to 18 months to show up, when

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does oil show up for companies?

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Yeah, the long lagged effects.

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I think in some ways very similar.

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If you do the math I think it's around 9 to 12 months.

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Again, this is my back of the envelope math that we need to

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try and figure out what the tipping points are, I think you

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need to see something like 135 to 150

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last 6 months, more than 6 months, probably

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last 9 to 12 months, to really see an

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overall impact that the market is fearful of.

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Otherwise, it could be just the same situation

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with tariffs that we sort of just end up

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absorbing and grinding through it.

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Which is not to say that we grind through it in a fantastic

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way to say that real GDP growth is going to

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be deterred by this as is real income growth, it is

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to say that maybe the cycle continues.

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Then you have to go back to, and this is also your original

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question, what is the market discounting?

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Okay, what is the market discounting, for sure, because it

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can discount an awful lot.

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Has it done it enough, I guess, is part of the question.

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If you're talking about short term indicators and being

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tactical and have we seen the low, I have no idea, probably

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not. Corrections, which I define as 10%

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in the S&P, more in the NASDAQ, happen most

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years.

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I don't won't to say that does not concern me but from an

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equity perspective that's what your base case should be

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going into any given year because it happens so frequently.

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We haven't even seen that yet so is it likely that we see

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it? Sure. Do I think it dilutes long

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term returns? Here is where my math is just

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different than most other people's math.

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I still see mathematical persistent fear

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in the equity markets.

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I still see a situation, and we can talk about private

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credit, and I don't think private credit is big enough to do

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anything relative to public credit, when you look at public

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credit we're not really seeing any stress.

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Lending has been good, now we're seeing bank

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loans picking up, we're seeing a liquid environment

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where long growth continues to grow.

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When you see this disconnect markets are

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more likely to climb the wall of worry.

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Think about when you go back COVID.

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In 2020 we saw COVID.

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2021 was a quiet year, we had a good year.

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2022 we saw Russia invade Ukraine and then the Federal

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Reserve hiked rates the most they ever had in

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history.

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Inflation resurged

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since we've seen in the '1970s.

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2023 we saw banks fail for

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the first time since the 1980s.

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2024 it was relatively light but there was the Japan carry

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trade. 2025 was the tariff tantrum.

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Now we have the conflict with Iran.

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All of those things, in some ways,

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carried existential risk, every single

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one we had which sparked a correction.

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That is really the problem with equity investing because the

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market can go up through a lot of things that

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we think are very existential, and, of course, there's no

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way you can get your arms around.

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The way I think about it mathematically is your biggest risk

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is that the market is discounting something that you don't

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understand and can go up through all

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of these existential crises.

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For me, that one indicator that I still gravitate to

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is the fear in the equity market relative to the fear in the

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credit market. We have not been higher now other

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than 2% of the time historically.

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We're as high as we were on my math as

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we were in the tariff tantrum.

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Now, the market hasn't even corrected yet, which is an

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odd starting point, which is not to say that the market

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won't correct but it is to say that this mathematically

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is a linear relationship.

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The more I see this the more I worry if

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I take my equity exposure down that all I

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do is dilute the potential returns, which is always the

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biggest risk. Equities overall return

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8% on any given year, which is not to say they ever give

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you 8%, they're either down 20 or up 20, down

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20 25% of the time and up 20 75% of

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the time but you have to ride through that roller coaster.

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The reason why most clients don't actually achieve those

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8% returns is because they're too busy selling when

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things seem risky when the market has already discounted it,

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and buying it when things seemed good which is usually when

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the market gas discounted the good news too.

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Clients get 2 to 3% returns by investing in

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equities instead of the 8% returns because

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everybody's too fearful of riding through the cycle.

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So, I mean, and you mentioned this when you listed all the

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different geopolitical issues over the course of sort of

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four or five years that the market has sort of powered

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its way through in its own way.

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It's about what the market can digest on a slower

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basis. That's why the spikes sometimes are a bank failure.

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You're always waiting for sort of the ripple effects

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everywhere. This feels different because

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it really does have ripple effects.

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I mean people in their everyday life are seeing it.

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This seems to be the ripple effect story.

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However...

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The suggestion is it can be absorbed and the market is

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already discounted for that and therefore you can kind of

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stay in. And the structural overall theme, which we haven't

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discussed, is AI is tech, essentially.

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Right, does it go back to that?

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Well, if oil is a little higher for longer, how can you

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offset inflation, which is productivity, which is back to

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AI? Now, when I look at technology, technology,

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every time I think that there's other sectors that are more

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interesting, technology hands me a reason.

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To think that it's still leadership and you're in the bottom

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third of the relative valuation when you look back to the

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60s. We haven't seen relative valuation this low

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in over a decade for the technology sector,

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which is not to say that there aren't some real risks within

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software and our company is going to be around in the form

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that they are right now, but it is to say that at this

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point, a lot of bad news is already discounted.

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So if you think about from an odds of outperformance

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perspective, you get over 70% odds of our performance,

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even if the worst things that we're talking about

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really come to fruition, which is companies worn,

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profit revisions come down, operating margins

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come off. All of those things that you're worried about

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might end up happening, but it might already be in

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the stocks. So you sort of philtre through the thesis

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together, and there's a lot of what I see as

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risk points to selling, right?

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So there's risk points, to both, there's obviously always

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downside risk that we are always thinking about, talking

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about. There's always upside risk as well.

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So, when you think about geopolitical conflict, first data

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point says, well, be careful because usually it doesn't

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impact long-term equity returns.

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Data point number two is, woo, it's different this time from

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an oil perspective. It's not nearly as stagflationary or as

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linear as the 70s, so think about that from that

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perspective. Three, you know, the market might be

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discounting more than you think.

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All of those layers, plus the fact that technology,

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which is former leadership, is back to valuation support,

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kind of lines up on a.

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Just maybe be careful to react

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too much to data points or headlines that

[00:16:33.560]

isn't supported with the overall historical data.

[00:16:36.000]

Is it possible then that the discussion

[00:16:39.200]

of like, you'll hear investors

[00:16:42.400]

say, well, we need to almost need to sell off more, although

[00:16:45.440]

the market has reacted and in some ways violently and

[00:16:48.600]

we've seen that in the VIX as it tells its own story, but

[00:16:51.360]

it's not where people start to talk about capitulation where

[00:16:53.920]

they really want to go shopping.

[00:16:55.280]

In terms of an investment perspective, we're putting the

[00:16:58.360]

geopolitics aside for a second here.

[00:17:00.080]

They're not sort of seeing those levels yet.

[00:17:03.200]

That's what you're hearing.

[00:17:05.560]

No, we definitely aren't. I mean there's a bunch of

[00:17:07.520]

different ways you can measure capitulation and in some ways

[00:17:09.800]

like the correction that I'm sort

[00:17:12.920]

of talking about can be achieved in two ways.

[00:17:15.160]

One, it can be very impulsive and you can get that

[00:17:17.400]

capitulation a la the terror of terror, right?

[00:17:20.400]

That was definitely- How many days-

[00:17:21.520]

How many days with that? That was like five, maybe four,

[00:17:24.600]

something like that, yeah.

[00:17:25.080]

Exactly. I think, yeah, it was 20% in like four or

[00:17:28.200]

five days.

[00:17:29.560]

Or you can have this like slow grind lower that

[00:17:32.760]

really never gets to something as punchy as 20%

[00:17:36.560]

but seems like, you know, you never quite get to 15 either,

[00:17:40.200]

right? So you get to 7 to 10 and it's just a grind it out.

[00:17:43.920]

For what could be a longer duration.

[00:17:46.360]

So it's short and capitulative, or it's sort of long and

[00:17:49.480]

grindy. Either way, I sort of step back and

[00:17:52.480]

say, where are we gonna be one year from here?

[00:17:54.560]

So I have no idea which path we will take in terms

[00:17:57.760]

of it being an impulsive decline that's capitulative or a

[00:18:00.560]

slow grinded out, which just seems like we never go up

[00:18:02.960]

either. But when you look sort of over the course of

[00:18:06.120]

a year, again, from the starting points.

[00:18:08.360]

You have historically, with only 2% of the time,

[00:18:11.360]

100% odds of a higher market with an average return of

[00:18:14.320]

something like 30%.

[00:18:15.960]

Which is not to say that that's my point of estimate of the

[00:18:18.240]

S&P 500, but it is to say that there is

[00:18:21.560]

upside risk here when you take a

[00:18:24.640]

long-term view.

[00:18:26.440]

So in the last Fed meeting, we

[00:18:29.840]

saw no movement.

[00:18:31.280]

There's lots of discussion around the Federal Reserve for

[00:18:33.960]

lots of different reasons.

[00:18:36.000]

With all of that said, the inflation story

[00:18:39.120]

leads everyone to say, oh my goodness, interest rates will

[00:18:42.240]

have to go up to combat inflation.

[00:18:45.640]

And I think we did see Stephen Mirren yesterday announce

[00:18:49.080]

that actually because of some inflation in the markets

[00:18:52.240]

and some data points that actually he and see.

[00:18:54.760]

Rates as low at the end of the year as he once did

[00:18:57.840]

and so on, so it's sort of feeding this inflation discussion

[00:19:01.000]

and what the hike story is.

[00:19:04.080]

With shocks like this, do you often see a Fed hike?

[00:19:07.320]

How are they connected or not connected?

[00:19:10.560]

Yeah, so second-order effects, right?

[00:19:12.280]

Great question. The interesting part, when you look

[00:19:15.280]

at the data, is the Fed talks a lot, right?

[00:19:17.640]

And I have no idea what this Fed will do and they can choose

[00:19:20.240]

to do anything they want. But the interesting thing is when

[00:19:22.480]

you look at data and you portion out, and if anybody wants

[00:19:25.680]

to use charts, you can find them on my LinkedIn.

[00:19:27.440]

Just go to charts of the week and you can subscribe to the

[00:19:29.880]

newsletter and then you can see the chart I'm talking about.

[00:19:32.000]

If you look the proportions of the time that crude went

[00:19:35.000]

up from 10, 20, above 20, above 30, above

[00:19:38.000]

50, all of that, you say, okay, the more crude oil

[00:19:41.000]

goes up, What is the likelihood over

[00:19:44.240]

the course of the next six months the Federal Reserve hikes

[00:19:47.040]

interest rates, or even coincident, and you will see a

[00:19:49.680]

steady decline over that six-month period?

[00:19:52.560]

Meaning that the bigger the inflexion in oil prices,

[00:19:55.920]

the less likely the Federal Reserves has been to hike.

[00:19:59.280]

And at the point where we are now, like that up 50 over the

[00:20:02.200]

two months, it's not zero, but

[00:20:05.240]

it's only 25%.

[00:20:07.360]

So most feds in history, which is not to say that this

[00:20:10.520]

fed has to think the same thing, but think of it the way I

[00:20:13.760]

think of, which is it's a tax hike on the consumer.

[00:20:17.360]

And much like we talked about tariffs, do some prices go up?

[00:20:20.840]

Absolutely. But if you don't dump a whole lot more

[00:20:23.840]

money on the customer, and we're not dumping money, we're

[00:20:26.160]

talking about offsets, then it's hard to get generalised

[00:20:29.800]

inflation in terms of all higher prices.

[00:20:32.400]

So if I need to spend more money on oil and gas, then I'm

[00:20:34.960]

going to spend less money on insert XYZ,

[00:20:38.240]

which means I have lower marginal propensity to consume,

[00:20:41.200]

they have lower and marginal propensity to price, and

[00:20:44.440]

therefore you don't see this generalised level of

[00:20:47.760]

inflation rise.

[00:20:49.400]

So historically speaking, to boil it down,

[00:20:52.440]

the Fed has usually looked through this.

[00:20:55.320]

I mean, in Canada, it's not the exact same discussion,

[00:20:58.600]

but the central bank has to answer all these questions as

[00:21:01.200]

well.

[00:21:02.880]

And it's very hard on parts of the economy to have a shock

[00:21:05.680]

like this, and the tariff shock is its own shock.

[00:21:08.720]

But, you know, net-net, we sell a lot of oil.

[00:21:13.880]

It works out at the very high GDP level

[00:21:17.280]

in the FDA.

[00:21:19.480]

No, that's the correct way to think of it, too, is because

[00:21:22.080]

when I did that offset math, it doesn't mean that every

[00:21:25.080]

income cohort or every income decile is benefiting.

[00:21:28.080]

In fact, it's not. I think most of the beneficiaries are

[00:21:30.840]

above the 50th percentile in terms of their income.

[00:21:34.160]

And this is, you know, higher oil prices, higher tariffs,

[00:21:36.840]

we're massively regressive.

[00:21:38.400]

And that is not offset by the tax rebates.

[00:21:41.880]

But in aggregate, when you look at the aggregation, which

[00:21:45.040]

is, I think, that how we wanna think about the aggregate

[00:21:47.360]

earnings and the aggregate stock.

[00:21:49.680]

There is sort of that mathematical offset that

[00:21:52.920]

you always need to be conscious of.

[00:21:55.120]

It's really interesting when we haven't spoken about the

[00:21:58.280]

consumer and sentiment, well, sentiment recently

[00:22:01.440]

due to oil and how that's hitting everyone.

[00:22:03.800]

But at one point, consumer discretionary, we're going to

[00:22:06.880]

talk about the Consumer Tomorrow with Annetta

[00:22:10.280]

Winnimco, one of your colleagues in the UK.

[00:22:12.640]

And one of the discussions I think she had mentioned that

[00:22:15.360]

she wants to talk about is that it's

[00:22:18.400]

sort of at trough levels. Like parts of that are at troughs,

[00:22:20.760]

so they're kind of interesting.

[00:22:22.200]

And I wanted to ask you with this.

[00:22:24.680]

Oil situation layered on top of it, does it push

[00:22:27.800]

you further into trough? How is the consumer, what is sort

[00:22:30.520]

of the sentiment story?

[00:22:32.400]

And maybe does it look interesting for you in the sectors

[00:22:34.760]

that you're looking at?

[00:22:36.400]

Yeah, I mean, I think it's interesting in terms of they're

[00:22:39.000]

miserable, but spending right, right, which is

[00:22:42.720]

Not something that you you usually see

[00:22:45.960]

historically, but although mathematically,

[00:22:48.960]

you know that it could relate like that Yeah,

[00:22:51.960]

in the sense that spending is correlated when sentiment

[00:22:55.400]

rises, but not necessarily when it falls Which means

[00:22:58.440]

that statistically you could be miserable spenders

[00:23:01.480]

historically speaking.

[00:23:02.800]

You just most are right now

[00:23:05.880]

So what matters most is not necessarily sentiment,

[00:23:09.560]

it is what will ultimately real incomes be.

[00:23:12.840]

What are those offsets?

[00:23:14.400]

And all of those trough indicators, to your point, are

[00:23:17.440]

usually Polish trough indicator, right?

[00:23:19.600]

For things like housing, for things like consumer

[00:23:22.120]

discretionary. So, you know, housing stocks have sold off a

[00:23:25.240]

lot on the pop and mortgage rates, which is the pop on

[00:23:27.680]

inflation fears when we price in the Federal

[00:23:30.840]

Reserve raising interest I'm not sure that's going to

[00:23:33.880]

come to fruition. You know, you couple that with the fact

[00:23:36.640]

that, like I said, home builders on a relative price-to-book

[00:23:40.160]

basis are still bottom decile, or certainly bottom quartile,

[00:23:43.680]

if not bottom decil, and you usually have a positive

[00:23:46.520]

risk-reward, which is not to say that we need to go up from

[00:23:49.440]

here, but it is to say, statistically, I think, downside

[00:23:52.520]

is limited, and if we're being shortsighted around

[00:23:55.600]

what the crimp and oil prices might be, I mean, one thing we

[00:23:58.680]

didn't talk about was be careful chasing, because supply

[00:24:01.840]

shocks tend to unwind.

[00:24:03.880]

Well, yeah, I was just going to say, before I ask you, go

[00:24:06.440]

ahead and take some water, before I ask about your top

[00:24:09.600]

three and bottom three sectors as they stand, you've

[00:24:12.360]

mentioned tech, but I did want to ask you about

[00:24:15.440]

that risk of

[00:24:18.440]

chasing, right? If you want to invest in oil and

[00:24:21.480]

thought, no, no it hasn't done anything for a long, long

[00:24:24.200]

time, there's probably a lot of people thinking, this is

[00:24:26.240]

where I want to put some money to work right now.

[00:24:28.360]

Just talk about that. And at this point, it spiked.

[00:24:31.600]

Now what?

[00:24:33.200]

Yes, I mean, in some ways, but I guess be careful about what

[00:24:35.880]

I say since energy was, you know, my bottom three sectors

[00:24:38.560]

coming into this year, and that was clearly wrong.

[00:24:41.440]

The question is, okay, you know we're wrong a lot, right, I

[00:24:43.840]

think you know that the best people in the business are

[00:24:46.080]

right, what do they say, 52% of the time.

[00:24:47.880]

We didn't see this coming. Yeah, we're trying for more than

[00:24:49.520]

that.

[00:24:51.080]

But the question is, okay, what do you do now?

[00:24:53.440]

So if you think about this as a supply shock and you say,

[00:24:56.640]

okay, if we think, you know, 50% over the course of two

[00:24:59.600]

months, that's the supply shock, how do we usually end

[00:25:02.640]

up the next year?

[00:25:05.080]

We usually end with lower oil prices, not higher oil prices.

[00:25:08.640]

And with underperformance of energy stocks, not

[00:25:11.360]

outperformance of the energy stocks.

[00:25:12.960]

Which is not to say I know the path, right?

[00:25:15.080]

Which is to say that oil has peaked or energy stocks have

[00:25:17.840]

peaked. But energy stocks will peak on a relative basis

[00:25:20.640]

before oil peaks on a relevant basis.

[00:25:23.160]

So be conscious of that.

[00:25:25.760]

So I see a real high whipsaw risk when

[00:25:29.320]

you look at supply shocks, because ultimately, when you take

[00:25:31.800]

a longer term view of a year long, we saw this when

[00:25:35.120]

Russia invaded Ukraine, we saw the same situation, oil

[00:25:37.720]

prices ended up lower, because ultimately unless

[00:25:41.200]

you're in this 70s regime, which I do not think we are,

[00:25:44.480]

there can be no pass through.

[00:25:46.080]

And higher prices end up curing higher prices.

[00:25:49.800]

I mean, it's so interesting because the whipsaw, there was

[00:25:52.880]

some discussion that you were going to talk about this and

[00:25:55.120]

you are talking about this, but that there indeed could

[00:25:58.320]

even be a rush for the door if you see oil

[00:26:01.600]

prices sort of, and I mean I guess that is the whipsaws,

[00:26:04.040]

isn't it? Like there's a rush to get in when you see them

[00:26:06.040]

going higher and then a rush to get out.

[00:26:09.200]

But there's dangers within that.

[00:26:11.760]

So stay the course, is that sort of the stay

[00:26:15.080]

the chorus?

[00:26:16.520]

Yes, and in some ways that is what I come back to

[00:26:19.520]

a lot, which is to say that the only ones who get hurt on

[00:26:22.600]

the roller coaster are the jumpers.

[00:26:24.840]

So, yeah, I think it's very difficult to sort of chase oil

[00:26:27.880]

here, unless you know something that I do not know, which is

[00:26:31.040]

exactly how this all ends.

[00:26:32.640]

And I will not say that I know that.

[00:26:34.840]

I will now play geopolitical strategist on TV.

[00:26:37.400]

Yeah.

[00:26:39.280]

Tell us a little bit about, so tell us the top three, bottom

[00:26:42.120]

three, you mentioned tech, I think that's at the top.

[00:26:45.000]

Yeah, so tech at the top, probably.

[00:26:47.840]

I would say right close next to it is

[00:26:50.880]

industrials, which we have talked about, because I

[00:26:54.120]

do not think that this dissuades the manufacturing recovery

[00:26:57.160]

that we have started to see inflect, which is coincident

[00:27:00.160]

with median earnings, right?

[00:27:01.600]

So at the level oil prices are now, again,

[00:27:04.920]

we're not seeing any problem with

[00:27:08.320]

what continues to be a grinded out, pretty good.

[00:27:12.160]

Inflexion in the manufacturing economy, which is not to say

[00:27:15.000]

that there's strength, but a pretty good inflexion.

[00:27:17.760]

And that usually means things like staples

[00:27:21.160]

and utilities, which aren't actually behaving particularly

[00:27:23.920]

well in this tape, are not going to be your

[00:27:27.120]

defensive options. Something like geared towards

[00:27:30.200]

that maybe durable industrial recovery, like industrials,

[00:27:33.880]

like transportation stocks, like machinery stocks, are going

[00:27:37.080]

to the better risk reward at

[00:27:40.240]

this juncture, right? And always think just regardless of

[00:27:42.920]

the market, like what you want to own within the market.

[00:27:45.480]

You know, it's interesting to think about if you are fearful

[00:27:48.320]

of a recession, one of the things that you want to do

[00:27:50.640]

statistically is look for stocks that have already priced

[00:27:53.280]

it. We just talked about technology being in the bottom

[00:27:55.800]

tersile of its range on relative valuation.

[00:27:58.440]

Software sort of is priced for its own great financial

[00:28:01.120]

crisis in some ways. You usually don't see a disconnect like

[00:28:03.760]

that other than things like a financial crisis.

[00:28:07.120]

And, you know, home building is like that and pockets of

[00:28:10.120]

industrials are like that as well, as manufacturing has been

[00:28:12.680]

in its own malaise for three years.

[00:28:15.080]

So I would say technology, industrials, and then I would say

[00:28:17.960]

the housing portion of consumer discretionary still is

[00:28:21.520]

an opportunity for me when I look at that sort of risk

[00:28:24.560]

reward, potentially lower interest rates over time.

[00:28:28.360]

As disinflation, I think continues, coupled with the fact

[00:28:31.400]

that I do think the housing stocks have discounted what

[00:28:34.200]

looks to me like a much harder landing than we might have

[00:28:36.840]

ultimately achieved.

[00:28:37.720]

Amazing okay, so top three bottom three then are

[00:28:41.080]

still

[00:28:42.680]

Energy, right, don't chase, careful chasing.

[00:28:46.960]

Consumer staples, for sure, which is in some

[00:28:50.120]

ways in the crosshairs in terms of their ability to price.

[00:28:54.160]

So historically speaking, they were your defence and

[00:28:56.720]

offence, right in the 80s.

[00:28:58.080]

We talk about technology being that now, right?

[00:29:00.200]

Technology is the consumer staples of the 80's, I think.

[00:29:03.000]

It's relatively unaffected from the sector perspective

[00:29:06.520]

versus other sectors in terms of their

[00:29:09.560]

ability to sell goods and have positive free cash

[00:29:12.680]

flow and margin.

[00:29:14.000]

So consumer staples, and I would also add in utilities.

[00:29:17.440]

So any defence gets me nervous and coupled

[00:29:20.640]

with energy.

[00:29:21.440]

And they have seen price spikes themselves over the

[00:29:24.440]

course of the last little while so maybe that's priced up.

[00:29:27.560]

Denise Chisholm, we are delighted always to speak to you.

[00:29:29.520]

You set us straight. Thank you for joining us here today and

[00:29:31.920]

have a great rest of your day.

[00:29:34.040]

Always great to be here. You too.

[00:29:36.640]

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[00:29:40.560]

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FidelityConnects: Denise Chisholm: Sector watch – March 26, 2026

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