Trevor Greetham's Investment Clock December: Upbeat about 2013

We are entering 2013 in an optimistic mood. The OECD’s lead indicator for global growth is bottoming-out. Housing market and labour market data from the US continues to come in strong with more recent Chinese data also surprising positively.

The US Federal Reserve has also committed to maintaining an easy monetary policy stance long into the upturn, even if this causes inflation to overshoot. Meanwhile, rising US property prices are easing strains in the US banking system.  A stronger US economy should help other economies recover, particularly those in emerging markets and Asia.

Constructive policy moves by the ECB this summer also reduced the risk of a euro break up, helping European equities to outperform. In the long run we expect growth differentials to dominate and our developed equity exposure remains tilted towards the US. Large parts of the corporate sector have already gone over the ‘fiscal cliff’ and a resolution to the talks should result in a positive US earnings surprise. US fiscal policy will tighten in 2013 but we think the recovery will continue uninterrupted.

LEAD INDICATORS IN FOCUS

Inflation
- In recent years, the impact of quantitative easing on commodity prices has meant that any pick-up in growth has gone hand-in-hand with an increase in inflationary pressures.

- We believe the premature rise of inflationary pressures is in part to blame for the shortness of the economic cycles since the financial crisis.

Growth
- Our global growth scorecard has stopped deteriorating and with OECD lead indicators picking up, we are hopeful that the cycle has passed its lows.

CURRENT ASSET ALLOCATION POSITIONING
- We are overweight stocks and underweight bonds in our funds.
- We favour US equities over Europe and the Emerging Markets over Japan.

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.

This document is for investment professionals only and should not be relied upon by private investors. It must not be reproduced or circulated without prior permission. This communication is not directed at, and must not be acted upon by persons inside the United States and is otherwise only directed at persons residing in jurisdictions where the relevant funds are authorised for distribution or where no such authorisation is required. Fidelity/ Fidelity International means FIL Limited, and its subsidiary companies.  Unless otherwise stated, all views are those of the Fidelity organisation.  Investors should note that the views expressed may no longer be current and may have already been acted upon by Fidelity.  The research and analysis used in this material is gathered by Fidelity for its use as an Investment Manager and may have already been acted upon for its own purposes. Reference in this document to specific securities should not be construed as a recommendation to buy or sell these securities, but is included for the purposes of illustration only. Fidelity only offers information on its own products and services and does not provide investment advice based on individual circumstances.  Fidelity, Fidelity Worldwide Investment and the Fidelity Worldwide Investment and F symbol are trademarks of FIL Limited. Past performance is not a reliable indicator of future results. The value of investments and the income from them can go down as well as up and investors may not get back the amount invested. Fidelity’s legal representative in Switzerland is BNP Paribas Securities Services, Paris, succursale de Zurich, Selnaustrasse 16, 8002 Zurich. Paying agent for Switzerland is BNP Paribas Securities Services, Paris, succursale de Zurich, Selnaustrasse 16, 8002 Zurich. Malta: Growth Investments Limited is licensed by the MFSA. Fidelity Funds is promoted in Malta by Growth Investments Ltd in terms of the EU UCITS Directive and Legal Notices 207 ad 309 of 2004.  The Fund is regulated in Luxembourg by the Commission de Surveillance du Secteur Financier.  Issued by FIL Investments International (registered in England and Wales), authorised and regulated in the UK by the Financial Services Authority. IC12/106