Peiqian Liu

Asia is entering the next phase of its growth cycle. Manufacturing and exports remain resilient, supported by artificial intelligence (AI) investment, energy security and supply-chain diversification. But after years of heavy reliance on external demand, Asian economies are increasingly seeking new growth drivers at home. The key question for the coming years is whether external surpluses can be channeled into broader domestic growth.

Peiqian Liu, Asia Economist, Fidelity International comments: “Across Asia, governments are using fiscal policy, industrial policy and incentives to develop new sources of growth around AI, semiconductors, energy, defence and advanced manufacturing. While the direction is similar, the policy objectives and starting points are quite different.

“South Korea is supporting large-scale investment in AI and semiconductors, while Taiwan is seeking to redirect domestic savings towards strategic investment, and Japan’s growth strategy aims to crowd private capital into strategic industries. Meanwhile, mainland China is redirecting investment from property to AI, advanced manufacturing and energy.

“However, policymakers across these economies also face distinct constraints, creating fresh challenges for markets as they navigate competing pressures from inflation, fiscal deficits, foreign exchange and capital flows. South Korea increasingly resembles a conventional reflationary cycle, as stronger technology exports support corporate profits, fiscal revenues and investment while inflation constrains monetary policy. Taiwan could face similar pressures if stronger income and fiscal support were to be transformed into consumption. The policy mix may therefore feature a fiscal accelerator alongside a monetary brake.

“Mainland China remains an outlier in the region. New growth engines in technology and advanced manufacturing continue to power ahead, but the transition remains uneven. Weak property activity and household demand continue to weigh on inflation, while softer private borrowing limits the effectiveness of monetary easing. The challenge is therefore not mainland China’s ability to generate investment, but whether the new economy can become large enough to offset the drag from the old growth model and eventually generate stronger domestic demand.
“Japan is the region’s most significant macro policy experiment. The government’s investment-led growth strategy and long-term nominal GDP ambitions aim to lift growth after decades of subdued capital spending. However, pressure on the yen and JGB market underscores the key constraint: fiscal expansion must strengthen productive capacity without eroding confidence, pushing bond yields significantly higher or prompting a more forceful Bank of Japan response.

“Across Japan, South Korea and Taiwan, a shared policy mix is emerging: more supportive fiscal policy alongside relatively tight monetary policy. Governments are trying to spur investment and domestic demand, while central banks remain constrained by inflation, currency pressures and financial stability concerns. Mainland China stands apart, with persistent disinflation and weak demand leaving scope for both fiscal and monetary easing. This divergence is likely to become a more important feature of Asia’s macro landscape in the coming quarters.

“Global monetary conditions remain important. Elevated US yields can limit room for Asian central banks to ease and put pressure on regional currencies, while excessive Fed tightening could eventually weaken the US investment and AI demand supporting Asia’s export cycle.
“The key test ahead is whether the technology windfall can translate into sustained domestic investment and demand, even as central banks manage the resulting inflation and financial-market pressures. If that transmission takes hold, the AI-led export boom could become more than an external demand cycle. It may signal the start of a broader Asian investment and reflation cycle, moving the region from accumulating external surpluses to putting capital back to work.”

Asia’s North star for investors

Investors are seeking strong structural themes, improving domestic fundamentals and attractive valuations. Mainland China, Japan, South Korea and Taiwan offer all three, arguably more compellingly than any other region globally.

Ian Samson, Portfolio Manager, Fidelity International comments: “Asia is at the centre of several major forces shaping global markets, from AI and semiconductor demand to electrification and energy resilience. Investor-friendly domestic reforms are also gaining momentum across these markets, turning what was once a headwind for international investors into a more supportive backdrop.

“This is why North Asia is drawing growing interest from active managers and asset allocators. The opportunity is broadest in equities, while currencies and fixed income require a more selective approach, with mainland China offering the clearest opportunity.

“Japan’s reflation story is creating a more supportive backdrop for equities, as the return of inflation, stronger nominal growth, supportive fiscal policy and still-low real yields help improve the outlook for domestically exposed businesses. Banks should benefit as higher interest rates restore lending margins, while Japanese mid-caps offer an attractive mix of strong earnings momentum and reasonable valuations. If healthy inflation, wage growth and stimulus continue, Japan’s equity market could remain one of the region’s most compelling opportunities. Taiwan, on the other hand, offers exposure to one of the world’s most dynamic semiconductor and AI hardware ecosystems, often at a discount to comparable opportunities in Western markets.

“Mainland China’s investment opportunity is extremely diverse, with policy support supercharging growth in areas such as advanced manufacturing, energy storage, optical networking and other strategic technologies, even as headline growth remains sluggish and the old economy struggles. Markets such as ChiNext and STAR50 offer access to these high-growth opportunities, but active management is critical given the pace of innovation and the stark divide between sustainable winners and future low-margin commodity players.”

AI and energy resilience take centre stage

Ian comments: “Artificial intelligence is becoming as much an infrastructure story as a technology one. Its rapid expansion is driving demand for computing power, advanced semiconductors, memory, networking equipment and reliable power infrastructure, much of which is concentrated in North Asia.

“South Korea and Taiwan are critical to global semiconductor supply chains, while Japan remains deeply embedded in semiconductor equipment and advanced manufacturing. Mainland China is also expanding across hardware, optical networking, energy storage and other areas tied to digital infrastructure. Together, these markets offer investors several ways to access the AI capital expenditure cycle.

“Valuations remain relatively restrained in parts of the market. South Korea’s technology giants look attractively valued if demand can hold near recent levels, while Taiwan trades at a discount to global equities despite being home to some of the world’s most important technology hardware companies.

“However, risks do remain, given the semiconductor sector’s historically cyclical nature and current valuations reliance on resilient earnings. However, if the AI infrastructure build-out extends into the next decade, The region should be well placed to benefit through the companies supplying the components, equipment and physical infrastructure behind AI.

“Asia is also central to the expansion of global energy infrastructure. Electrification is driving demand for grid equipment, battery storage, transmission networks and power-management systems, while data centres are adding another major source of demand for reliable electricity and the infrastructure needed to deliver it.

“This is creating opportunities beyond the traditional renewable-energy sector. Mainland China leads in battery technology and energy storage, while Japan and South Korea have strong industrial capabilities in power equipment, electronic components and infrastructure.”

Trade surpluses and subdued inflation create opportunities in Asian fixed income
Ian comments: “Asian currencies and bonds may attract less attention than equities, but investors should not overlook the region’s stores of value, particularly as concerns persist around US fiscal sustainability and inflation in developed markets.

“Mainland China stands out given its markedly different macroeconomic backdrop. Subdued inflation has supported Chinese government bonds as a store of value, while the country’s large trade surplus provides fundamental support for the renminbi.

“Beyond mainland China, Asia also benefits from undervalued currencies and trade surpluses. While currencies can remain cheap for extended periods, investors seeking to diversify away from the US dollar may find fundamentally supported opportunities in other Asian markets.”

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Manning will be responsible for representing and growing Fidelity’s fundamental equities franchise in Australia, working closely with portfolio managers, clients and distribution partners to deliver investment insights and solutions across Fidelity’s Australian and global equities capabilities.

Manning joins Fidelity from T. Rowe Price, where she was vice president and senior portfolio specialist, leading commercial strategy and communications across a range of global and US equity strategies. Prior to this, she was a director and client portfolio manager at Epoch Investment Partners, where she was responsible for several global equity strategies and played a key role in commercialising new investment solutions. Earlier in her career, she held senior equity sales and research roles at RBC Capital Markets, Liberum Capital and KBC Peel Hunt, working with institutional investors across the US and Europe.

Her appointment reflects Fidelity’s ongoing commitment to strengthening its presence in Australia and investing in experienced talent to better serve clients. As client demand for high-quality active investment solutions continues to evolve, Fidelity remains focused on expanding its capabilities and deepening engagement with investors across the region.  

Simon Glazier, managing director, Australia, at Fidelity International, commented: “Her combination of investment expertise, commercial insight and client-facing experience makes her an excellent addition to the team.

“Australia remains a strategically important market for Fidelity, and we remain committed to investing in our people and capabilities locally. Tamzin’s appointment strengthens our equities franchise and enhances our ability to support clients with high-quality investment expertise and insights.”

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Matt Jones

For the past few years, investors have been rewarded for owning what is already working but it is becoming increasingly important that they understand what is driving this success and what the risks might be, says Matt Jones, Fidelity International portfolio manager for the Fidelity Research Global Equities Fund.

He says that as markets have grown more concentrated, with a relatively small number of stocks driving a significant share of index returns, factors such as momentum have become powerful forces in investment performance.

“When something works for a long time, it can start to feel less like a risk and more like a certainty, but investors should be questioning what is driving returns beneath the surface. Momentum can be thought of as a bit like a wolf in sheep’s clothing. When enough capital crowds into the same ideas for long enough, many roads eventually lead to the same destination. The distinction between quality, growth and momentum can begin to blur. The challenge is that momentum often looks safest right before it becomes most vulnerable.”

He says that one of the more interesting characteristics of momentum is that it tends to reinforce itself.

“Strong performance attracts investment, and that flow of investment pushes prices higher. Higher prices then attract more capital. The cycle continues until it doesn’t. None of this means momentum is inherently bad. Indeed, momentum has been one of the strongest drivers of market returns in recent years.

“But for investors, it’s worth considering whether portfolios are benefiting from deliberate exposure to momentum, or whether exposure has simply accumulated over time as a by-product of portfolio construction.”

Jones says many investors may not be aware how concentrated their portfolios have become.

“When we talk about concentration, most people immediately think about stock or sector weights, but concentration can also exist at a much deeper level. For example, you could have multiple asset managers, across multiple strategies and mandates, and yet still end up heavily exposed to the same underlying factor, such as momentum.

“But at the same time, true diversification is becoming more difficult to achieve. It’s not about having more investments, it’s about owning different return drivers. That’s becoming increasingly relevant in a world where data is widely available – if everybody has access to the same data and increasingly the same AI tools, where does genuine diversification come from?

“Some of the most persistent sources of returns come from areas that are harder to replicate. Fundamental insights, deep company research and forward-looking views remain valuable because they involve judgement, context and interpretation, not simply historical datasets. The future rarely looks exactly like the past. What makes fundamental insight powerful is that it’s inherently forward-looking. It combines data, experience, company engagement and judgement in a way that purely backward-looking models cannot.

“Investors should ask themselves: How much of a portfolio’s return profile is dependent on a narrow group of stocks, sectors or factors that continue to dominate? How diversified are the underlying alpha sources? What risks are they actually being paid for taking? Some investors may conclude their existing exposures remain appropriate. Others may identify areas where diversification could be improved.

“For investors navigating an increasingly concentrated market, thinking about whether portfolios are sufficiently diversified should market leadership change is invaluable.

Momentum can be a powerful tailwind when it is working but the challenge is ensuring it’s not the only engine powering the portfolio,” Jones says.

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Min Zeng

Japanese equities have performed strongly this year, supported in part by enthusiasm around AI-related opportunities. As markets entered the third quarter, however, they began to digest the narrow rally that drove Q2 performance. Semiconductor and AI-related stocks have pulled back notably, but Min Zeng, portfolio manager, Fidelity International, views this primarily as a reassessment of valuations and earnings expectations rather than a meaningful deterioration in corporate fundamentals.

Min Zeng comments: “The key point is that the market appears to be shifting from a theme-led phase to one more focused on earnings delivery. Demand for AI infrastructure, data centres, memory, advanced components and related supply-chain investment remains intact, but investors now require clearer evidence of order growth, pricing power, margin resilience and guidance support. In this environment, companies that can convert strong demand into sustainable earnings and returns on capital should be better placed than those relying mainly on thematic momentum.

“Japanese companies continue to occupy important positions across the AI value chain, including memory and storage, advanced substrates, passive components, power semiconductors, optical components, industrial automation and precision manufacturing. While some of these areas have faced near-term valuation pressure, the pullback appears to reflect a rebalancing of crowded positions after strong prior gains, rather than a reversal in underlying demand trends.

“Beyond the semiconductor supply chain, we remain constructive on selected areas linked to electrical equipment, industrial automation and power infrastructure. As AI adoption expands, investor attention is broadening from computing capacity to the infrastructure needed to support AI deployment, including transmission and distribution networks, cooling technologies and data-centre-related equipment. While Japanese companies possess strong technological advantages across these sectors, selective positioning and a disciplined focus on valuations remain essential.

“Financials are also an important area of opportunity. The Bank of Japan’s gradual policy normalisation should support a more favourable earnings environment for banks through improving net interest margins and reinvestment income. At the same time, corporate governance reform is encouraging better capital allocation, higher dividends and share buybacks. As market leadership broadens beyond AI-related names, selected financial companies with resilient earnings profiles and attractive valuations have shown relative strength.

“We continue to see opportunities in companies linked to infrastructure investment, defence spending and corporate capital expenditure. Supply-chain reconfiguration, energy transition, infrastructure modernisation and national-security investment are creating demand for industrial equipment, engineering and advanced manufacturing technologies. In parallel, labour shortages and the need to improve productivity should support investment in automation, machinery and related infrastructure.

“Looking ahead, Japanese equities are likely to experience further volatility as investors assess earnings results and reset expectations after a strong rally. Nevertheless, the broader investment case remains intact. Current market dynamics suggest rotation rather than a broad withdrawal from risk assets. As Japan moves from an AI-driven market to a more earnings-driven market, active stock selection should become increasingly important.”

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Niamh Brodie-Machura

Key points

• 55 per cent of Fidelity analysts expect companies’ cost inflation to rise over the next 12 months as a result of the renewed Middle East conflict
• Analysts expect capital expenditure to increase, with the strongest expectations in utilities, energy and information technology
• Most analysts expect corporate profitability to remain resilient over the next 12 months despite higher expected cost

The resumption of hostilities in the Middle East has renewed concerns over inflation and supply chain disruption, but many businesses have yet to feel the full impact on their costs, according to Fidelity International’s latest Analyst Pulse Survey. 

The quarterly survey of almost 100 of Fidelity’s equity and fixed income analysts, conducted in June and informed by the team’s ongoing meetings with company management teams, found that 55 per cent expect inflationary pressures within the companies they cover to increase over the next 12 months as a result of the Middle East conflict.

While many businesses have so far been protected by energy hedging programmes and existing inventories, analysts believe higher energy, freight and raw material costs are likely to become more visible as those protections expire. Consumer, industrial and utilities companies are expected to experience the greatest increase in cost pressures, although analysts anticipate higher input costs across every sector and region.

Niamh Brodie-Machura, CIO, equities at Fidelity International, said: “The renewed conflict is adding to an already uncertain backdrop for businesses. While many companies have yet to feel the full impact on their cost base, our analysts expect inflationary pressures to become more apparent over the coming months as existing buffers begin to unwind. The extent to which companies can manage those pressures is likely to become an increasingly important differentiator.”

Sam Heithersay, portfolio manager, Fidelity International adds: “For Australia, the picture is one of broad resilience but rising dispersion. Australia remains relatively well placed as a net exporter of energy and commodities, which helps to support ongoing capital investment and cushions the economy at an aggregate level. But higher energy, freight and raw material costs will add to an already persistent domestic inflation backdrop, with greatest pressure likely to fall on domestically exposed companies that lack the pricing power to pass on costs without sacrificing margins or market share.”

Companies continue investing despite rising cost pressures

Despite this more challenging environment, analysts expect companies to continue increasing capital expenditure. Expectations are strongest in utilities, energy and information technology. These sectors are expected to play a central role in supporting continued investment in artificial intelligence (AI) infrastructure, from power generation and networks to semiconductors and data centres.

Analysts also expect corporate profitability to remain resilient over the next 12 months. Despite higher expected costs, more analysts expect profitability to improve than deteriorate, suggesting many companies remain well placed to manage inflationary pressures despite a more uncertain operating environment. 

Heithersay comments: “Corporate profitability in Australia should remain relatively resilient, underpinned by strong balance sheets and double-digit earnings growth at a market level. Recurring geopolitical disruption has made corporate resilience more than just a defensive attribute and increasingly a competitive advantage. The strongest companies will likely be those that can preserve margins through the current cost shock while maintaining the operational discipline and cost flexibility to absorb the next one.”

Brodie-Machura concludes: “Taken together, the survey highlights three themes shaping markets today: persistent inflation pressures, rising capital expenditure and resilient corporate profitability. While geopolitical uncertainty is creating new challenges, many businesses appear well placed to navigate them. For investors, identifying those companies that can continue investing while maintaining profitability will remain critical.”

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Source: Fidelity International Q2 Analyst Pulse Survey 2026. The quarterly survey was conducted in June 2026 and features 110 responses from 95 of Fidelity International’s equity and fixed income analysts covering global sectors and regions.

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Ario Emami Nejad

Despite the higher oil and commodity prices sparked by the Iran-US conflict, inflation in the US and globally is not expected to spiral out of control and we are not likely to see the same interest rate hiking cycle that was experienced in 2022, according to Ario Emami Najad, co-portfolio manager of the Fidelity Global Bond Fund.

“While we are likely to see a period of above target inflation, data from the US shows that the labour market is stabilising, and a sustained period of interest rate hikes is unlikely”. Equally “We don’t think the market is wrong by pricing in interest rate hikes in the future, but we don’t think we are in an environment similar to 2022 when we went down a path of sustained hiking cycle,” he says.

Emami Najad says it is unlikely that the Fed will issue more than two hikes this year, but suggests other central banks may hike more.

“Following last week’s 25bp hike by the European Central Bank, the market continues to expect another hike this year. However, if the oil price continues to remain high following the ceasefire, then we are likely to see more hikes in 2026. The Bank of England faces a similar scenario if high energy prices persist. It does not want to hike because of the risk to the UK economy. But if this conflict drags on for longer, the bank, against its own will, might be forced to increase rates.”

“The facts on the ground can change at any moment. The central banks which are looking to hike, might decide to hold off or cut rates if the situation turns on the unemployment front, so an active duration management approach is necessary for bond investments. We are in a higher for longer environment, but we are not in a higher forever environment.”

“In 2022, the central banks had to do a lot more to tackle the inflationary shocks that we were seeing across the world. Whereas today we are already starting at a high point, so much so that the shock that we are seeing is not really going to be as bad as it was in 2022,” he says.

With the market’s current equities euphoria, Emami Najad says that bonds still provide a good hedge against investment risk and should be included as a diversifier in a portfolio. “Investors underestimate the hedge that owning bonds still provides for their investment portfolios.”

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Sam Heithersay

As we head into the second half of 2026, Fidelity International believes fundamentals are relatively supportive of risk assets, despite a highly volatile backdrop. The conflict in the Middle East has reaffirmed that investors are navigating a fragmented world. Markets are starting to look through the short-term noise towards resilient fundamentals supporting asset performance through the rest of the year, while the AI capex cycle remains a powerful upward driver for markets across the globe.

At the same time, traditional safe havens may not play the same role as they used to. And diversification is expected to prove more important than ever.

Top conviction for the rest of 2026:

• Equity risk: We are constructive overall, particularly in Japan and select emerging markets. We remain mindful of the strong rally markets have seen since April.
• AI capex: It has been the driving force for global markets and is supporting other themes like energy scarcity and grid upgrades.
• Commodities: Boosted by geopolitical fragmentation and the AI capex cycle, commodities that are energy-linked may provide useful diversification for geopolitical risk when traditional assets such as duration and gold behave less reliably.

Navigating the second half of 2026

“Markets have proven impressively resilient against a volatile first six months of this year. But their steadfastness shouldn’t be surprising. They’ve become well-versed in seeing through the noise and recognising upside,” said Salman Ahmed, global head of macro and strategic asset allocation, Fidelity International. “Now is not a time to shy away from risk, only to ensure it’s balanced in a well-diversified portfolio that will cushion the inevitable shocks when they come. While recent diplomatic progress between the US and Iran may help ease some immediate concerns, uncertainty remains elevated and the path ahead is unlikely to be straightforward.

“The key macro variable for the near future is the energy supply shock caused by the closure of the Strait of Hormuz. Our base case has been a ‘messy resolution’ to the conflict. The proposed deal to reopen the Strait of Hormuz and extend the ceasefire, points towards de-escalation, however, there remains a meaningful range of possible outcomes. Markets are likely to continue pricing some geopolitical risk premium until a durable resolution becomes clearer. Higher inflation and tighter monetary policy will drag on growth across most regions; energy markets will maintain a persistent geopolitical risk premium.”

A constructive environment

Resilient fundamentals are supporting markets, despite geopolitically-induced volatility. Most significantly, US tech behemoths are continuing to pour billions into AI development that is driving continued earnings momentum. That immense capex spend is bolstering companies across the value chain, including the industrial enablers that support the building of data centres and rising energy needs. A wider set of US businesses are also starting to feel the impact of that AI-driven capex spend underpin earnings and improve productivity. This broadening effect across the market presents enticing entry points while attention is focused on a small number of high-valued tech names.

Matthew Quaife, global head of multi asset, at Fidelity International, comments: “The earnings story remains strong globally, driven in part by the AI capex story, but also due to resilient economies and the partial unwinding of trade tariffs. The AI trade and strong earnings are supporting US stocks, though parts of that market have already run a long way. Emerging markets (EM) remain a high conviction allocation. EM equities benefit from broader tailwinds like the AI cycle. A softer dollar and structurally improving policy credibility should also be positive drivers. However, the conflict in Iran is having a divergent impact across different parts of the EM universe. Those exporters of commodities in Latin America are benefitting; those that import energy, particularly Asian economies that are reliant on supply that passes through the Strait of Hormuz, are suffering.

“Other structural themes will persist elsewhere, with Europe still investing in its defence sector, for instance, as conflict continues and policymakers strive to localise defence supply chains. Similarly, there is renewed focus on improving energy resilience, resulting in further investment by the US and Europe in their ageing grids.”

Rethink safe havens

As the macro environment changes, there is a need to rethink diversification. Heightened geopolitical and fragmentation risks are putting a strain on traditional safe havens, which means investors can’t rely on a single asset to support riskier elements of their portfolio. The dollar, for instance, does not look as attractive for the long term as it once did, owing to less consistent US policymaking. Exposure to commodities should support portfolios, with inflation set to remain higher for longer, particularly those with energy exposure that can protect against geopolitical risk.

A changing playbook for Australian equities

Australian equities are navigating an increasingly complex macro backdrop. Inflation remains above the RBA’s target range, geopolitical tensions are disrupting supply chains and energy markets, and the path for interest rates is proving more uncertain than expected at the start of the year. While the domestic economy has held up relatively well, higher funding costs and weakening consumer momentum are creating a more uneven earnings environment.

At the same time, the foundations remain supportive. Employment is still robust, population growth continues to underpin activity, and Australia is well positioned as a strategic supplier of resources and energy in a more fragmented global economy.

Sam Heithersay, portfolio manager, comments: “An important shift is taking place cantered on market leadership. For much of the past decade, Australian equity returns have been dominated by banks and domestic yield exposures, supported by falling interest rates, stable regulation and a concentrated market structure. While banks still benefit from resilient asset quality and strong capital positions, the conditions that drove sustained outperformance are becoming less powerful.

“We believe the market is now entering a period where leadership is likely to broaden. Higher rates and slower credit growth are beginning to constrain parts of the domestic economy that benefited most from abundant liquidity. At the same time, elevated bank valuations leave less room for disappointment. This raises a critical question for investors: does leadership shift away from domestic financials towards areas more exposed to structural global themes?”

Structural drivers are gaining momentum

Sam Heithersay comments: “There are increasing signs that this transition may already be underway. A higher-for-longer rate environment makes it more difficult for expensive defensives and long-duration income exposures to sustain the valuation premiums seen in the post-GFC period. In contrast, areas leveraged to structural shifts including deglobalisation, supply-chain security, energy transition and AI-driven change — are becoming more influential drivers of returns.

“Energy is one clear expression of this shift. Higher prices continue to pressure consumers, reinforcing a preference for more defensive exposures over discretionary spending. However, at a national level, Australia remains a reliable supplier of LNG, coal and uranium into a world increasingly focused on supply security. This is supporting national income and parts of the earnings base despite softer domestic conditions.

“Importantly, a genuine shift in market leadership is unlikely to be defined by a short-term rotation into commodities alone. A more durable transition would require evidence that markets are increasingly rewarding structural earnings growth, supply scarcity and global positioning over domestic leverage and housing exposure.

“Rather than viewing sectors in isolation, the focus is increasingly on identifying businesses exposed to structural tailwinds that can persist across multiple economic cycles. As a result, Australian equities may become less driven by traditional domestic exposures and more influenced by global themes such as scarcity, technological change and economic realignment.”

AI continues to drive growth while reshaping valuations

James Abela, portfolio manager, comments: “Artificial intelligence (AI) and rising commodity prices are dominating the drivers of earnings and multiples in the Australian small- and mid-cap universe. AI’s impact is broadening, extending into business consulting, engineering, finance, business software, legal and healthcare industries. We expect productivity benefits to flow over time. The durability of existing software or service moats, franchise strength and the ability to stay ahead of AI-driven product innovation are becoming increasingly important considerations that we expect to come into sharper focus over the next few years.

“Capital investment into AI in 2026 is currently running towards US$1 trillion, up from US$260 billion in 2024. This not only highlights AI’s rapid growth but also its scale in the global technology landscape. Competition for leadership is driving significant flow-on effects across data centres, associated engineering services, cooling systems, semiconductors and memory storage, as well as related commodities such as copper.

“For Australia, the positive flow-on benefits of AI have primarily been seen in the resources sector. Beyond the AI build-out, commodity prices have risen and remained higher for longer in 2026, supported by resource scarcity, a growing preference for physical over financial assets, and the appeal of HALO (heavy assets, low obsolescence) businesses. These assets are viewed as defensive, with low beta characteristics and rising replacement costs that continue to underpin strong valuation support.”

Volatility expected to remain

James Abela comments: “Factor leadership has shifted towards value and momentum, while quality has underperformed as duration concerns have weighed on companies traditionally viewed as having more predictable and resilient earnings profiles.

“There is still double-digit earnings per share (EPS) growth expected over the next 12 months, and index-level valuations are not elevated at around 16 times forward earnings. However, much of this growth is being driven by resources and energy, with limited breadth across other sectors remaining a key concern. With consumer and business investment sentiment still subdued, caution is likely to persist. Positively, the Australian market continues to expand, which we believe will support index performance over time.”

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Based in Sydney, Rosie brings more than 20 years of experience in global equities across portfolio management, fundamental research and valuation. In her new role, Rosie will manage the Fidelity Global Equities Fund and Fidelity Hedged Global Equities Fund, a key offering within Fidelity’s Australian domiciled fund range.

Rosie’s appointment reflects Fidelity’s continued commitment to active global equity investing and to ensuring Australian clients have access to Portfolio Managers with deep global expertise.

Rosie joins Fidelity from Australian Foundation Investment Company, where she established and led the firm’s Global Equities strategy. In this role, she designed the investment process and built a diversified, long-term, low-turnover portfolio focused on high-quality businesses.

Prior to this, Rosie was a portfolio manager and head of franchises at Magellan Asset Management, where she was responsible for investment and portfolio recommendations and held sector leadership responsibilities within a concentrated global equities strategy. She also served on the firm’s Investment and Macro Committees.

Rosie began her career at Goldman Sachs, working in Sydney and New York for 15 years, where she gained extensive experience across valuation, strategy, capital markets and company analysis.

Simon Glazier, managing director, Australia, at Fidelity International, commented:

“Rosie is a highly experienced global equities investor with a strong track record of building disciplined, high-quality portfolios. Her deep expertise, combined with her experience in establishing and leading global equities strategies, makes her an excellent addition to our team.

“Rosie’s appointment reflects our continued commitment to strengthening our investment capabilities in Australia and delivering high-quality outcomes for our clients. We are particularly excited about her leadership of the Fidelity Global Equities Fund and the opportunity to further grow and evolve our offering in the local market.”

Rosie’s appointment underscores Fidelity International’s focus on investing in local talent and expanding its global investment expertise to better serve clients in Australia.

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Maroun Younes

With market uncertainty increasing, investors should look to quality companies that have the ability to generate consistent profits and consistent returns regardless of the macro-economic environment, says Fidelity International portfolio manager, Maroun Younes.

“Historical data shows quality does well in uncertain environments, but where there is positive slower growth, such as the one we are currently experiencing. The macro-economic picture is becoming murkier, and the euphoria of high growth and positive sentiment is subsiding. This tends to coincide with periods where quality starts to rise to the top.”

Younes concedes there is debate about how to define ‘quality’. “Some academics focus on profitability metrics, margins, returns, and volatility of the earnings profile. Others use metrics like shareholder payout ratios and balance sheets to define quality.”

Younes says it is important to look at quality in the context of the valuation multiples as well as the business’ sustainability. “Resilience and durability are key. Investors should look for companies that can withstand the curve balls that the global marketplace throws from recessions, pandemics, wars, rising interest rate environments and increasing competition. Having a strong and solid footing means a business can withstand the impact from different forces effectively. This is the mark of a quality business,” says Younes.

The Fidelity Global Future Leaders Strategy has conviction positions that are expected to benefit from the inflexion in the market led by AI capex investments. “We have a high level of conviction in the sustainability of the AI capex build up for the next two years and hold a number of companies exposed to the trend in our portfolio. For example, we have maintained conviction in Halma (LON: HLMA) for some time now, and we have seen that rising hyperscaler data-centre investment has benefitted its photonics and technology solutions division. Our position in electrical services provider Comfort Systems USA (NYSE: FIX) rallied after reporting solid fourth-quarter results and highlighting a robust order backlog supported by sustained data centre demand,” he says.

Younes adds, “Recent geopolitical tensions have introduced a renewed layer of uncertainty in the market, but investors should not lose sight of their long-term goals. Quality can contribute to very strong performance in the long term. The message to investors is to stay the course, because over the long term, quality outperforms.”

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In its report, Lonsec noted that “The Fund benefits considerably from Fidelity’s vast global research capabilities” and “experienced portfolio management team that shares significant co-tenure in operating this and other systematic strategies”.

The Fidelity Research Global Equities Fund focuses on equity securities of companies in developed and emerging market countries throughout the world. The strategy provides an opportunity for investors to leverage Fidelity’s research analysts’ best stock recommendations, in a systematically constructed portfolio to mitigate factor or style biases, with the aim of delivering strong returns primarily driven by Fidelity’s stock selection capabilities.  It is managed by three portfolio managers, Matt Jones, Hiten Savani and Daniel Swift.

The Fund’s investment philosophy is anchored on the belief that the consistent capture of proprietary idiosyncratic alpha from Fidelity’s global team of fundamental analysts delivers long term outperformance. Fidelity’s extensive global research platform benefits from over 50 years of investment knowledge and proprietary research that is grounded in the conviction that both overall macroeconomic trends and fundamental research can help predict the prospects of individual companies with a great degree of accuracy

Simon Glazier, managing director of Fidelity International Australia, says there has been growing interest in systematic investing approaches amongst Australian investors. “The current volatile market is one where systematic investing can be particularly attractive.  As an investment approach, it allows customisation, repeatability, risk control and portfolio construction. Investors are telling us that this stable and persistent approach is very attractive in an uncertain environment. And unlike conventional passive strategies, our approach offers the potential to outperform the index by harnessing the best ideas from our global team of analysts.” 

While there can be varied definitions of what systematic investing encompasses, portfolio manager Matt Jones says that Fidelity’s approach is to use strong fundamental research, systematic processes and strong portfolio construction to deliver alpha to investors.

“Systematic investing can also help avoid unintentional biases, both conscious and unconscious. This includes “style-drift”, where a value bet or growth bet, or a preference for large or small caps, can creep into portfolio construction without investors realising it. In addition, we can draw on our vast set of proprietary fundamental data that no-one else has access to, based on research and analysis by Fidelity experts from around the world, over many decades.  We also believe it is very important to be forward-looking, especially in the current environment, which is different to other quant-based funds,” he says.

In its report, Lonsec also noted the resourcing, saying: “The key edge over peers is the breadth of on-the-ground resourcing from Fidelity’s large analyst pool for idea generation.”

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