Trevor Greetham's Investment Clock december: The 1990s Bull Market Revisited

The Investment Clock is in the equity-friendly ‘Recovery’ mode. With China playing the
disinflationary role of Japan in the 1990s, the positive backdrop for developed market stockmarkets could last for years. We are overweight US and Japanese equities, markets that tend to benefit
from US dollar strength. We are underweight the emerging markets, commodities, bonds and interest rate-sensitive equity sectors. Physical real estate should continue to offer solid returns.

LEAD INDICATORS IN FOCUS

Growth
Global growth lead indicators remain strong and suggest the benign environment will remain in place.

Inflation
Inflation pressures remain very low, with our inflation scorecard indicator pointing downwards in 22 of the last 24 months.

The US Federal Reserve has started to taper its quantitative easing programme
but it is worth noting that Chairman Bernanke emphasised this was not meant to
be a tightening move and that interest rates would remain low for a very long
time if inflation continues to undershoot its 2% target.

CURRENT ASSET ALLOCATION POSITIONING
We have been significantly overweight equities for more than a year. With monetary policy loose and
inflation pressures minimal, we expect the positive backdrop to continue with growth picking up as US fiscal drag lifts.

We deepened our underweight in commodities this month. Excess capacity, US dollar
strength and slower trend growth in China are structural headwinds. Since
February 2013, our largest underweight has been gold.

Trevor Greetham joined Fidelity in January 2006. He is Director of Asset Allocation and in addition to managing funds, Trevor is a member of Fidelity’s Asset Allocation Group. Prior to joining Fidelity,
he spent ten years at Merrill Lynch, where he was Director of Asset Allocation. Trevor began his career with UK life insurer Provident Mutual. He holds an MA in Mathematics from Cambridge University and is a qualified actuary.

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