FidelityNow: Andrew Marchese’s mid-year market outlook

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So if we look back six months, we came into the year, I think, noticing a

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few positives. One was, generally speaking, in both Canada and

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the United States, we saw a lot of improving

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economic metrics.

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So in both manufacturing and service.

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And that was good. And so the market got off to a good start this year.

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As we got into late February, obviously, we had to deal with

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the Iran conflict, and so the conflict in the Middle East.

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We saw a spike up in oil prices as a result of that.

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So a lot of people were consternating exactly about what you said, higher

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prices at the pump.

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What would that do for consumers' wallets, discretionary spending?

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What would mean for industry that manufactures things because

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the price of raw materials would go up in nature

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and therefore that would potentially hurt profit margins.

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We thought, generally, these things are kind of fleeting, and indeed, it's

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proven to be fleeting. Oil is now back in the 70s, and it

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didn't take that long to get there in the grand scheme of things.

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So as we look forward into the next six months of the year, the theme

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that tends to be dominating the stock market is all things related to

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artificial intelligence, whether you're talking about data centres, power

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generation, and supply. All of this is in some way, shape, or form related.

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It has been the most newsworthy and probably

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frothiest placed in the market on a day in and day out basis.

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So that is probably that those themes are going to dominate continued

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going forward. I think to a somewhat lesser degree, there

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could be a continued talk about central bank interest rate policy

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going forward, so you may have seen more recently

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that some inflation metrics have ticked up.

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We attribute that largely to.

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Oil and some other input costs that have temporarily risen, it

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would not surprise me if those numbers came off in the back half of

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the year, and we wouldn't have to worry about necessarily

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central bank tightening to curb inflation.

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That will be an ongoing watch to see how those numbers progress,

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and by definition then how central banks will react.

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Typically, when central banks have to tighten, and they

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have to tighten multiple times...

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That has a knock-on effect of slowing the economy, not immediately,

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but usually about 12 months out.

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And the market kind of sees through that and that results in a higher discount

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rate, which means lower valuations and also potentially some

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negative earnings revisions.

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But we're not there yet. So this is just something to keep on our radar screen.