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Asset Allocation Research Team (AART)
AART conducts economic, fundamental, and quantitative research to develop asset allocation recommendations for Fidelity's portfolio managers and investment teams. AART is responsible for analyzing and synthesizing investment perspectives across Fidelity's asset management unit to generate insights on macroeconomic and financial market trends and their implications for asset allocation.
Multi-Horizon
Framework
AART believes that economic fundamentals provide the backdrop for asset markets, influencing corporate earnings, interest rates, inflation, and many other factors that affect the returns of stocks, bonds, and other asset classes. Our framework begins with the premise that long-term historical averages provide a reasonable baseline for portfolio allocations. However, over shorter time horizons—30 years or less—asset price fluctuations are driven by a confluence of various short-, intermediate-, and long-term factors that may cause performance to deviate significantly from long-term historical averages. Read More ...
Secular
(10- to 30-year time frame)
Over this long time horizon, asset performance is heavily influenced by economic trends that evolve over extended periods, like demographic changes and productivity growth.
Business Cycle
(1- to 10-year time frame)
Over the intermediate term, asset performance is often driven largely by factors tied to the state of the economy such as corporate earnings, credit growth, and inventories.
Tactical
(1- to 12-month time frame)
Over shorter time periods, prices can deviate from their longer-term trends, providing attractive entry and exit points. Geopolitics, consumer sentiment, and flows all play a role here.
Demographic changes and productivity growth are two of the key drivers of long-term economic trends. Our secular approach centers on a research-based, multifaceted process to develop 20-year capital market assumptions for our asset allocation strategies. This comprehensive global approach is underpinned by fundamental analysis, across all geographies, of the core drivers and the principal linkages between economic trends and how they affect the performance of various asset classes.
We begin developing our long-term asset return and volatility assumptions by establishing 20-year forecasts of each country’s real, gross domestic product growth. Next, we identify the connections between GDP growth and asset class performance and translate them into specific asset assumptions.
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For this reason, incorporating a framework that analyzes underlying factors and trends among the following three temporal segments can be an effective asset allocation approach: tactical (1 to 12 months), business cycle (1 to 10 years), and secular (10 to 30 years).
Our duration-based asset allocation framework provides a thorough understanding of asset characteristics across various time horizons, which we then use to derive conclusions about portfolio construction. Because our analysis disaggregates economic drivers across asset classes for short-, intermediate-, and long-term time horizons, portfolio managers can use our research to focus on the signals that are most relevant to the individual objectives and constraints of a particular investment strategy.
Source: Fidelity Investments (AART). For illustrative purposes only. Always consider fees and expenses when rebalancing a portfolio.
Foundational Papers
Quarterly Market Update
Quarterly Market Update Video
In this video, Dirk Hofschire, Senior Vice President of Asset Allocation Research, examines major themes in global financial markets and presents his investment outlook for the second quarter of 2023.
Interactive Presentation
Market Insights
The Team
Fidelity's Asset Allocation Research Team provides insights on macroeconomic and financial market trends for Fidelity's portfolio managers and investment teams. We assign individual analysts and particular streams of research to each of the three durations, allowing clearer investment conclusions when short-, medium-, and long-term trends move in different directions. This duration-based approach allows us to formulate conclusions customized to the specific objectives and time horizons of particular investment strategies, while also allowing us to synthesize our analysis to provide holistic asset allocation recommendations.
Lisa Emsbo-Mattingly
Director of Asset Allocation Research
