FidelityConnects: Jurrien Timmer – The global macro view March 9, 2026

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Hello, and welcome to Fidelity Connects.

 

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I'm Agnes Doherty, Vice President of Regional Sales here at Fidelity Canada.

 

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It's the start of a new trading week and markets are under pressure.

 

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US equity slid this morning at the opening bell as oil prices surged past

 

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$100 a barrel, a level not seen since 2022

 

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when prices soared in the wake of Russia's invasion of Ukraine.

 

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The jump has reignited concerns about a potential stagflationary backdrop,

 

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one that's defined by rising inflation and slowing economic growth.

 

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What can past oil shocks teach us about how markets and economies adapt, and

 

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more importantly, what are the signals that investors should be watching

 

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now as energy volatility returns to the centre stage?

 

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Joining me now to unpack all of this and more to set you up for the trading

 

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week ahead is Fidelity Director of Global Macro, Jurrien Timmer.

 

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Jurrien, welcome. Thanks so much for joining us today.

 

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It looks like you're at our head office there in Boston.

 

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Yes, I'm at the mothership. Welcome, Agnes, to the show.

 

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I'm sure you've been on before but we haven't been on together so looking

 

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forward to our conversation.

 

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It's great to be able to chat with you, especially today.

 

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Obviously, markets are near all-time highs but the headlines this week have

 

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been incredibly heavy.

 

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Just a few weeks ago we're talking about this Goldilocks scenario in the

 

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markets where we had stable earnings, we had an easing Fed,

 

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a stable bond market, and now we've got oil prices over $100

 

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and so much geopolitical tension and uncertainty.

 

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Let's talk about it and give us

 

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your update on where we stand today.

 

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There's a lot to unpack. If we go to slide 1

 

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we can see that this is, obviously, all about oil prices,

 

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at least for the markets.

 

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Of course, this conflict with Iran kind of

 

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came a little bit out of the blue.

 

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The markets were riding high on the Goldilocks theme.

 

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There was the convergence trade between the Mag-7 and everything

 

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else was working in a very benign way, meaning that

 

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the broadening didn't come at the expense of the market cap leaders.

 

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We had very robust earnings, we still do, about

 

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15% earnings growth, an easing Fed down to 3%,

 

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bond market very, very quiet, the dollar quiet, it

 

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really was a very sort of nice mid-cycle

 

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type market. I suspect at some point that

 

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will return and that these convergence trades will resume

 

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once the tree has been shaken of sort of the the

 

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fast money crowd, if you will.

 

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Right now, of course, the big question is oil prices spiked to

 

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about $108 overnight, they're still up but they're

 

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at 96 right now. As a result the market is bouncing back.

 

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We see the S&P down about

 

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4, 5% from the highs, EAFE around 7%,

 

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EM around 10%. It's what you would expect when you see a

 

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massive spike in the oil price.

 

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If we go to slide 3 you can see historically that

 

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we've had a number of oil shocks.

 

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In the top panel I showed the 5-year CAPE ratio

 

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for the S&P 500, in the bottom panel

 

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in the brown is the nominal oil price, and in the purple

 

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is the inflation-adjusted oil price indexed to today's

 

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dollar. You can kind of measure the previous moves in

 

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terms of what oil is trading at today.

 

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Of course, we had the big oil shocks in the '70s,

 

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the Yom Kippur War in 1973, and then the Iranian Revolution

 

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in '79.

 

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We had the Gulf War in 1990, that was sort of a

 

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quick one and my guess is that maybe the administration was hoping for

 

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a repeat of that. Then, of course, we had not a conflict

 

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but we had the peak oil theme

 

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back in the 2000s.

 

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In 2022 we had the Ukraine conflict that spiked oil prices

 

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as well.

 

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Right now we're, obviously, in this conflict.

 

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It's not like Venezuela where you just decapitate the head of the snake

 

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and you take over.

 

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Iran is a whole different ballgame.

 

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There's a reason why this region has been in conflict for

 

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1,000 years so maybe the administration bit off a little bit more than

 

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they can chew here.

 

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There's already a new Ayatollah, the son of the former one,

 

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I don't think the Republican Guard is going to go anywhere.

 

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The big question for the markets is, is

 

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the market correct in assuming that this will last

 

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a few weeks, or maybe more, but then we will revert

 

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to normal and the Straits of Hormuz reopen, that is

 

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the epicentre right now, or will

 

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it be longer, or will the President declare victory

 

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even though he doesn't have one and we get into a TACO moment and

 

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then hope that things go back to normal.

 

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There's a lot of variables, China gets its oil from Iran so maybe

 

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China can become a peace broker of some sort.

 

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We don't know. In the meantime, as you mentioned, this is

 

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somewhat stagflationary, at least over the near term.

 

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Obviously, oil prices going up adds maybe half a per

 

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cent to the inflation rate.

 

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The Fed does tend to focus on core inflation but still inflation is

 

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inflation. If the Fed was on a path to cut to 3%

 

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maybe that path takes longer or instead of

 

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3 it's 3 1/4 or no more cuts at all.

 

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That's been reflected in the long end but still at 4.13 the

 

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10-year yield is hardly at a level that's going to affect the market

 

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in a meaningful way.

 

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Right now we wait and it's a matter

 

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of how quickly or slowly this resolves.

 

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You can see that in the oil futures curve, the forward contract

 

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minus the front contract, and the oil curve is in

 

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severe backwardation, as you would expect, because the Straits of Hormuz is

 

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closed and many oil producers have already halted their production

 

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or slowed down to production.

 

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The back contract, let's say for nine months from now, is trading

 

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at closer to 65, 70 and the current contract

 

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is trading at 96, that's for WTI.

 

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The oil market is expecting this to be temporary.

 

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I think the market is taking its cues from the crude oil market right now.

 

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Just so much uncertainty and so many unknowns at this point.

 

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Based on your analysis at what point does higher oil actually become

 

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a real economic problem?

 

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Is it the level of oil prices or is it the length of time that they

 

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stay elevated that really will determine that?

 

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One thing to note, and this is good news, is that

 

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the American consumer, and I presume the Canadian consumer as

 

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well, is far less sensitive to the price of oil than

 

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it was during the '70s or even the '80s and '90s.

 

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Just a lot less of personal consumption expenditures

 

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come from gas and oil.

 

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The price of oil going from 70

 

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to 100 and not going much further

 

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I think is a shock kind of like tariffs that can be absorbed,

 

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especially if it's not a permanent shock.

 

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Historically, what we've seen is it's less the level

 

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of oil prices and more the rate of change.

 

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Again, think about the oil shock of the '70s, you went from $3

 

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to $12 when consumers were

 

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spending a lot of their disposable income on energy, that is

 

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a true shock. Going from 70, 100 or even to 150,

 

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if it doesn't stay there and it comes back it'll be a shock, it

 

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will shave some growth off of GDP and it will add some inflation

 

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to the CPI, but it would be kind of a one-off thing.

 

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That's why the length and how protracted this conflict becomes

 

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will be very important for the markets and that's why the market basically

 

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is trading on this oil spread between now and, let's say,

 

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a year from now or six months or nine months from now.

 

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You mentioned stagflation, we've seen that word creeping into the headlines

 

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over the weekend as well. Do you think that that is a real risk to the market

 

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or is this comparison with the 1970s a little bit overdone at this

 

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point?

 

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I think for now it's overdone but again, it depends on how transitory

 

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the spike is. We have seen spikes before.

 

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We saw one in 2022 and although that did coincide

 

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with a bear market in equities that bear market really was predicated

 

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on sharply rising cost of capital and not a

 

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problem with consumer spending. Obviously, inflation was

 

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a big problem but oil was only a part of that.

 

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It was all about COVID and supply chains.

 

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In 1990 during the first Gulf War

 

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oil prices in today's dollar terms did spike quite a bit to $100,

 

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again, in today's terms but they fell back as

 

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quickly as they rose and that had very little impact.

 

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There was a recession in 1990 but that had more to do with the savings

 

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and loan crisis than with the price of oil.

 

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If it is transitory I don't expect

 

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that any stagflationary effects will linger but

 

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if this becomes a long, drawn-out thing, even if the

 

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President says, okay, I'm declaring victory, the

 

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Republican Guard in Iran might not agree with that unless they're getting

 

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brokered by China or something like that.

 

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So it really depends.

 

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There are always other factors going on.

 

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You do have potentially quite some deflation coming from

 

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the AI boom, although that could be labour of deflation so that

 

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is not necessarily a good thing. We always have to weigh all of these

 

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things together, just like the tariffs last year

 

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produced some inflation but it was offset by, for instance, lower oil prices,

 

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there's always a number of things going on.

 

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The way it is right now at $96 WTI, I

 

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don't think this will have lasting problems for the US

 

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or Canadian consumer or the economy.

 

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Let's bring the conversation to Canada for a moment.

 

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I think I speak for everyone when I say we're very invested in what happens to

 

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Canadian markets and especially the Canadian dollar as well.

 

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How do you see the sort of geopolitical tensions and the

 

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higher oil prices as a consequence of that playing out for

 

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Canadian markets as a net exporter of oil?

 

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I think Canada wins over this.

 

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Right now the US dollar is bid as it tends to

 

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get done when there is uncertainty and tension

 

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but I think that too will be transitory.

 

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I think the Canadian dollar will be okay in this.

 

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I think any export of commodities, you can see in

 

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this new geopolitical world where we have spheres of influence rather

 

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than this one super cop ruling

 

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the entire planet, commodities become a strategic asset

 

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and it's not just gold, it's not just oil, it's copper, it's other assets

 

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and I think this is going to be part of the power play that we

 

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see happening around the world. I think any country that is

 

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a big producer of natural resources, and you've got two of them, you've got

 

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gold and oil, and others, of course, I think

 

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that is an asset. I think whether that plays

 

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a role in a USMCA revision or just

 

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Canada exporting to other continents, not forget

 

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a Straits of Hormuz which will be a big plus, I think is

 

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good for the long term.

 

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Hello, investors. We'll be back to the show in just a moment.

 

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I wanted to share that here at Fidelity, we value your opinion.

 

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DialoguesFidelity podcasts available on Apple, Spotify, YouTube, or wherever

 

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else you get your podcasts. Now back to today's show.

 

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Let's talk about the Fed. We have a new Fed chair, very accommodative

 

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Fed policy, how do you see what's playing out in the markets now potentially

 

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impacting where rates in the US go from here, what's being

 

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priced in right now?

 

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Let's go to slide 7 which shows the Fed funds forward curve,

 

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or the SOFR curve.

 

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Just the developments over the last few days have

 

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taken out one rate cut from the expected path.

 

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That dotted black line is the SOFR curve.

 

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It was at 2.94 at the low point last week, it's

 

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now at about 3.20. It's not a huge difference, it's one rate cut, and I think

 

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the Fed really only had two more rate cuts anyway.

 

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Fed is at 3 5/8 right now.

 

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eights right now so going to 3 1/4 or going to 3 in

 

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my view is not really that big a deal.

 

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The 10-year yield, which is in the bars there, it shows how

 

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tightly knit that triangle has

 

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been, and we're still sort of coiling in that triangle.

 

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Not that much is happening on the rate side.

 

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We will have the FOMC meeting coming up shortly and we

 

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will have new leadership at the Fed which, presumably, will be Kevin Warsh.

 

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He will want to lower rates.

 

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Stephen Miran was on CNBC last week and he was saying he

 

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thought neutral was about 2 1/2 to 2 3/4.

 

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I have no idea where he gets that number because inflation is at 3

 

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and R-star, at least according to the Fed's own estimates, is at

 

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1 1/2. That gets you to 4, 4 1/2 as neutral.

 

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Not to call them political pushovers but there is an agenda

 

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there to push short rates down, maybe steepen the yield curve,

 

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deregulate the banks, and get the commercial banks to take over,

 

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essentially, the assets that are on the Fed's balance sheet.

 

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That would be the way that the Trump administration would bring

 

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the benefits of QE from Wall Street to

 

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Main Street. I think that is an overriding agenda.

 

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I think Warsh and Bessent will work together on that.

 

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I don't see this really changing anything.

 

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It might change the speed at which they get to 3% or

 

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lower but I think assuming that we're not going to

 

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be looking at $150 oil prices for the next several years in

 

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a row I don't think this scenario is going to change

 

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the path forward that much.

 

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We do have a question coming in here from the audience and a good reminder for

 

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everyone on the call please do submit your questions to Jurrien through the Q&A

 

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box. This listener wants to know what are your thoughts on the

 

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US job numbers right now?

 

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The jobs report last Friday was weak.

 

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There was a loss in jobs and more downward revisions

 

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in previous months.

 

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It's a mixed report because the ADP numbers were

 

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reasonably healthy.

 

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The household survey was healthy.

 

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Fidelity actually has a hand in I think something

 

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like half of the S&P in terms of we

 

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do the benefits administration for large companies so we have a

 

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sense of where job hiring is going on a real

 

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time basis because we administer the payrolls,

 

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and our own proprietary data suggests that the jobs market is

 

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okay. It is a slow hire, slow fire type

 

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of market.

 

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Of course, there are some distortions.

 

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There was a health care strike last month that lowered the payroll

 

[00:17:19.638]

numbers. There's the birth-death adjustment rate.

 

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There, obviously, is a slowdown because immigration is at a standstill.

 

[00:17:28.614]

It's not by any means a robust jobs market but

 

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I think the overall market is not as weak as the jobs report suggests

 

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last Friday.

 

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I wanted to take the conversation to the US equity market.

 

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You've been talking about this a lot recently.

 

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Investors have been reducing concentration in Mag-7, going into

 

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more equal-weighted benchmarks as well as down the cap spectrum, just

 

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give us your most recent update on that trade and do you

 

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still think that that rotation has legs?

 

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Let's go to slide 5.

 

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So my sense is that the convergence trade

 

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where everything else, including international equities,

 

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catches up to the S&P cap-weighted index

 

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which, of course, has been heavily influenced by the Mag-7.

 

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In this chart I show the cap-weighted S&P at the top, the

 

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equal-weighted below that, you can see that the equal-weighted

 

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really accelerated higher in recent weeks and then gave a good chunk of it

 

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back last week. I think that's partly a reflection of

 

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the convergence trade, as I call it, or the broadening trade,

 

[00:18:44.423]

became very popular so that means that fast money kind of jumps in.

 

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Whenever there's a shock in terms of headlines the fast money is the first

 

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to go, right, because they're maybe trading on leverage or they're tourists

 

[00:18:57.035]

and not long term investors.

 

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Again, EM down 10% from the highs while the S&P is only down 4%

 

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or 5%. I think part of that is just repositioning.

 

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I don't think it has any impact on the underlying trend

 

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of convergence so I'm still very much in favour of

 

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the broadening trade. Again, so far it's been a benign

 

[00:19:21.293]

broadening. Actually, if we go to slide 4 you can

 

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see that the Mag-7, which is in top panel there, continues

 

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to kind of hang on to the support line.

 

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I thought maybe this morning it would slice right through but with oil prices

 

[00:19:37.509]

only up 6% instead of over $108

 

[00:19:42.948]

the S&Ps are actually down only half a per cent so it's

 

[00:19:47.152]

still hanging on there.

 

[00:19:49.054]

I think that's an important chart because if the Mag-7 really

 

[00:19:53.492]

falls underneath this range of the last four or five months

 

[00:19:57.963]

the S&P is going to go down, there's no other way around it, and then you would

 

[00:20:02.134]

get into kind of a 10% correction in the S& P, maybe

 

[00:20:06.071]

a 15% correction in other markets.

 

[00:20:09.942]

That's a correction, I think, that should be bought because, again, the

 

[00:20:13.378]

fundamentals, earnings, margins, CapEx, productivity,

 

[00:20:18.350]

rates, are all still very favourable and the

 

[00:20:22.554]

average stock isn't really that expensive.

 

[00:20:25.657]

The S&P equal-weighted index is trading at a 19 P/E which

 

[00:20:29.728]

is above average but it's not

 

[00:20:33.665]

that far above.

 

[00:20:36.268]

What's happening now, I think, is repositioning.

 

[00:20:38.537]

If we go to slide 6 we can see this.

 

[00:20:41.106]

Before the Iran conflict began

 

[00:20:45.510]

the correlation, the 13-week correlation between the S&P equal

 

[00:20:49.648]

and S&P cap-weighted plummeted from

 

[00:20:53.919]

almost 100% where it normally is to about 40%

 

[00:20:58.223]

and the correlation between the

 

[00:21:02.494]

ex-US, so the MSCI ACWI ex-US and the S&P,

 

[00:21:06.765]

actually went negative.

 

[00:21:08.667]

That shows you the broadening trade that the

 

[00:21:12.704]

cap-weighted index became less and less correlated with these other components.

 

[00:21:17.209]

Now, we know that at times of stress correlations

 

[00:21:21.380]

go to 1 so they've already reversed.

 

[00:21:24.416]

That was sort of a short-lived thing but I do think that once the dust settles,

 

[00:21:28.820]

no pun intended, the trades that

 

[00:21:32.891]

were in place before this conflict will resume.

 

[00:21:37.262]

Sounds like overall fundamentals of the market are very strong and a 10% to

 

[00:21:41.166]

15% correction is healthy and a needed shakeout

 

[00:21:45.304]

for the overall market.

 

[00:21:47.606]

Yeah, I mean, 10% corrections happen all the time.

 

[00:21:51.410]

They happen basically every other year about 40% of the time historically.

 

[00:21:56.982]

As long as the fundamentals remain robust, and they certainly do,

 

[00:22:01.486]

I think it's one that you use to rebalance.

 

[00:22:03.722]

We all should be rebalancing and markets were

 

[00:22:07.826]

maybe a little bit over their skis but not too much.

 

[00:22:12.230]

I think this is a far better scenario than

 

[00:22:16.201]

it could have been because last fall, I

 

[00:22:20.138]

remember we were in Palm Beach and everyone was talking about is this an AI

 

[00:22:23.975]

bubble? If this really had turned into a bubble and the P/Es

 

[00:22:28.080]

got really stretched and the trends got really stretched this

 

[00:22:32.150]

kind of headline would do a lot more damage than if the market is

 

[00:22:36.254]

relatively in balance with the fundamentals.

 

[00:22:39.558]

That's not to say the market wasn't a little bit stretched.

 

[00:22:41.693]

My own DCF model suggests that

 

[00:22:46.331]

fair value was around $6,500 instead of $7,000.

 

[00:22:50.635]

Guess what, as of this morning we were at about $6,500.

 

[00:22:54.239]

I think the market's okay here and the fundamentals will win the day as

 

[00:22:58.210]

they always do.

 

[00:22:59.511]

Speaking of the AI bubble conversation, has that really just died down?

 

[00:23:03.548]

I know the CapEx spending numbers have been astronomical but if someone was to

 

[00:23:07.419]

ask you today about the AI Bubble what would your response be to that?

 

[00:23:12.391]

The AI story hasn't gone away.

 

[00:23:14.526]

We can pull up slide 2 here.

 

[00:23:17.896]

There are still two very big critical questions about

 

[00:23:22.000]

the AI revolution. Well, there's many questions, of course, but two of

 

[00:23:26.004]

them for the markets are is all this

 

[00:23:30.142]

CapEx by the hyperscalers, hundreds and hundreds of billions a quarter, are

 

[00:23:35.013]

they going to generate an ROI for those companies, or

 

[00:23:39.384]

is it one company takes all the

 

[00:23:43.388]

wins and the other one loses and then there's maybe a trillion dollars

 

[00:23:48.560]

of infrastructure spent that doesn't see a return.

 

[00:23:52.664]

That, I think, is a very legitimate question and we don't

 

[00:23:56.635]

know the answer.

 

[00:23:58.737]

We've been in that phase where the picks and shovels win.

 

[00:24:02.441]

Just like the gold rush a few centuries ago the companies that

 

[00:24:06.478]

produce the things that the hyperscalers need

 

[00:24:10.549]

to have in order to build the infrastructure, those

 

[00:24:14.519]

companies have, obviously, been very successful, the semiconductors, the power,

 

[00:24:18.690]

all of that stuff.

 

[00:24:20.692]

Whoever wins the race, we don't know whether it's Google or Nvidia,

 

[00:24:25.697]

but that is a legitimate question.

 

[00:24:27.999]

The other one is, of course, in the software and SaaS stocks.

 

[00:24:33.004]

One thing we're seeing, and this was the theme of that now

 

[00:24:37.242]

infamous research report by Citrini a few weeks ago,

 

[00:24:41.346]

a shop that no one's ever heard of but now has become quite

 

[00:24:45.283]

well-known, where they said the worst case left tail scenario

 

[00:24:49.654]

is that the AI boom just makes

 

[00:24:53.658]

labour redundant because expertise becomes commoditized.

 

[00:25:00.899]

Personal knowledge, human knowledge, has always been the scarce

 

[00:25:05.804]

resource and in AI maybe it's not scarce

 

[00:25:09.774]

anymore. Those are not my words but that is one scenario that's

 

[00:25:13.812]

been bandied about. That gets you to the private markets, private

 

[00:25:18.450]

equity, private credit, a good chunk of those

 

[00:25:22.721]

investments have been in AI related software.

 

[00:25:25.457]

In this chart in the bottom there you see above

 

[00:25:29.528]

the dotted line WTI, the MOVE Index, the VIX,

 

[00:25:33.698]

of course, what you would expect volatility measures across the board are

 

[00:25:37.702]

up. In the bottom panel you see the drawdowns in the

 

[00:25:41.706]

public companies that specialize in these private markets.

 

[00:25:46.311]

Blue Owl has been over the news, Apollo, we just saw

 

[00:25:50.615]

BlackRock gating their investors, so

 

[00:25:55.453]

that is a sign of stress that there's been some misallocation

 

[00:25:59.558]

of resources.

 

[00:26:00.759]

Again, with AI it's so hard to predict what

 

[00:26:04.896]

is going to happen once the machines take over, not to sound

 

[00:26:08.934]

too dystopian.

 

[00:26:11.136]

This is that creative disruption that happens when new technologies get

 

[00:26:15.640]

invented and that's certainly been one of them.

 

[00:26:18.710]

Overall I think it's still a

 

[00:26:22.881]

fairly benign story and the productivity gains that the

 

[00:26:26.952]

economy will benefit from will, hopefully,

 

[00:26:31.356]

increase the non-inflationary speed limit of the US and

 

[00:26:35.527]

world economy in such a way that we have a chance to kind of get

 

[00:26:39.564]

in front of the debt burden that is growing by the day.

 

[00:26:44.135]

Jurrien, we have a couple of questions here that I'd like to get to just in the

 

[00:26:46.938]

last few minutes. One of our viewers would like to ask about the US midterm

 

[00:26:51.142]

elections and how do you see that impacting the markets.

 

[00:26:54.713]

What does history tell us?

 

[00:26:57.949]

Sorry, Agnes, can you repeat the question because there's some crackling on the

 

[00:27:01.586]

line.

 

[00:27:02.520]

Yes, a viewer is asking about the US midterm elections and how that may

 

[00:27:06.291]

potentially impact the markets. What does history tell us about that?

 

[00:27:09.961]

I'm sorry but we're having some audio problems

 

[00:27:14.132]

here. I know we have two minutes left but

 

[00:27:16.034]

let me just, I'm sorry, I don't know what you asked, but let me just talk about

 

[00:27:20.472]

while we are in the closing.

 

[00:27:23.508]

When I think about asset allocation and

 

[00:27:27.445]

a balanced portfolio, let's go to slide 10, what

 

[00:27:31.449]

has really worked recently has been commodities

 

[00:27:35.920]

and non-US markets.

 

[00:27:38.490]

If you take a 60/40 in the blue and a kind of hypothetical 60/20/20,

 

[00:27:43.662]

not investment advice at all, you see how well

 

[00:27:47.632]

those markets have been going.

 

[00:27:51.202]

When we think about the correlation effect of a

 

[00:27:55.240]

well-balanced portfolio which, of course, today is another example

 

[00:27:59.444]

of why we need to be well diversified, if we go to slide 11

 

[00:28:03.882]

we can see the correlation between equities

 

[00:28:08.019]

and bonds, that's slide 11, has

 

[00:28:12.390]

really been evolving over time.

 

[00:28:14.292]

I think still equities

 

[00:28:18.730]

are the driver of a 60/20/20, a much more

 

[00:28:22.734]

global swath. Certainly one thing I'm looking for in the next few

 

[00:28:26.671]

weeks or months is an opportunity to get back in the same

 

[00:28:31.843]

broadening trade that has worked so well since the tariff tantrum

 

[00:28:35.880]

last year.

 

[00:28:37.415]

The other thing that really is on my radar is slide 14, and that's Bitcoin

 

[00:28:42.220]

which actually is doing quite well right now.

 

[00:28:45.790]

60,000 is still the level that I'm really focusing on here

 

[00:28:49.994]

as an entry point. So far it has held quite well.

 

[00:28:54.365]

I do think that the degree to which

 

[00:28:58.636]

Bitcoin is oversold against not only its own trend but also

 

[00:29:02.741]

against gold is that that could be one of the next big plays

 

[00:29:06.978]

in the coming months.

 

[00:29:09.514]

Okay, we're going to wrap it up here.

 

[00:29:12.817]

Jurrien's a pro so he's able to handle these technical issues

 

[00:29:17.188]

in his sleep. Thank you so much, Jurrien, for your time today.

 

[00:29:21.192]

Wonderful hearing from you and, hopefully, this has provided everyone with some

 

[00:29:25.430]

really great insights and timely insights into everything that's happening in

 

[00:29:29.100]

the markets right now.

 

[00:29:30.368]

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