HEAD-TO-HEAD: Capital Group versus Fidelity

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Isaac Poole, Oreana Portfolio Advisory

A strong performance so far this year by global equities, against worries about rising inflation has provoked caution among some market strategists.

The MSCI World Index is up 9.77%, according to FE Fundinfo data, which although the rise is hardly excessive in the context of other four months periods, it has prompted fears that the rally, especially since March, has run ahead of fundamentals.

For instance, Luca Paolini, chief strategist of Pictet Asset Management, downgraded equities to neutral this week, citing fears that economic and corporate earnings growth may be peaking, which has encouraged him to recommend profit taking.

Moreover, globally, stocks’ earnings multiples should come under further pressure in the coming months as monetary stimulus fades, he warned.

A major problem is that investor sentiment is already very bullish, so any positive market reaction to news of stronger profits is likely to be muted, while weaker-than-expected results could be severely punished.

HSBC Asset Management (AM) shares Pictet’s wariness.

The firm continues to support the “restoration economy” thesis, as several key economies outside of Asia begin to reopen, but with confidence in future growth now reflected in market prices and future price action likely to be driven by how good news is versus expectations, HSBC AM believes investors should show caution in their asset allocation.

Against this background, FSA asked Isaac Poole, chief investment office at Oreana Portfolio Advisory, to select two international equities products for comparison: the Capital Group World Growth and Income Fund and the Fidelity World Fund.

Source: FE Fundinfo, Morningstar. (Data in US dollars, from 29 Sep 2019 – 7 May 2021)

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