Navigating election-year uncertainty

With investors facing an unpredictable economic and political landscape, Fidelity's Adam Kramer is remaining patient and looking to opportunistically take advantage of asset class mispricing.

• In a year marked by a highly consequential U.S. election and a global economic environment riddled with uncertainty, the best course of action, according to Fidelity Portfolio Manager Adam Kramer, is to avoid making outsized asset class bets while awaiting more clarity.
• "2024 has already brought about significant geopolitical crosscurrents to capital markets, and now the looming presidential election only adds to that mix, as investors will weigh two vastly different governing visions," explains Adam Kramer, who manages Fidelity Advisor^® Multi-Asset Income Fund.
• In helming this flexible income-oriented strategy, Kramer dynamically pursues attractive income and value opportunities across a wide variety of asset classes, ranging from investment-grade bonds to dividend-paying equities, where temporary mispricing often causes investors to overreact to fear or uncertainty.
• These days, says Kramer, market participants are asking a lot of questions, and rightfully so, about how the election will influence the economy in the coming years: Both major-party candidates have proposed trade tariffs, but how big will they be? What type of and how much economic stimulus might we see? Will the tax cuts enacted in 2017 expire in 2025?
• "In short, depending on which way the election goes, we see a lot of differing potential economic outcomes," he notes.
• Kramer points out that while he pays close attention to both the economy and electoral developments, he doesn't expend much effort trying to predict the future, as doing so isn't a repeatable aspect of his investment approach.
• "That said, I am always cognizant of where we are in the cycle and am looking for asset classes that have too much bad news priced into them," Kramer says. "Moreover, the repeatable and duplicable part of my process is that the income-oriented asset classes tend to take turns each year as either the best or worst performers, only to shift the following year."
• He clarifies that this is because the market prices in credit, earnings and interest-rate risk well before the actual events occur. So, each year, no matter what the big-picture narrative is, there is always an opportunity to seek value, income and natural volatility dampeners, an aspect that differentiates his investment process from others.
• "I can easily envision a variety of scenarios, from a weaker U.S. dollar and skyrocketing commodity prices, to stagflation, to an economic boom, or even a catastrophic global event that leads to an economic shock and a return to zero interest rates," Kramer underscores.
• Ultimately, says Kramer, he thinks that we are at an economic inflection point, a pivotal moment where the financial tide could turn at any moment.
• "Against this inherently volatile backdrop, in my view, the best course of action is to stick to and trust our investment process, while waiting for the market—either rightly or wrongly—to price in risk, and then invest accordingly," Kramer concludes.