Fidelity Boosts Mid-Cap Stocks 11% Amid Tariff Threat Easing

Fidelity International's fund manager has expressed optimism about the financial markets moving past the worst phase of the Trump administration's tariff threats. This shift has made mid-cap stocks an attractive investment option. The manager highlighted that mid-cap stocks from Japan, Germany, and China constitute approximately 11% of the holdings in Fidelity's growth and income funds. This allocation makes these stocks a key component of the fund's strategy. In contrast, around 18 months ago, the fund had limited exposure to these types of stocks.

The manager's optimism is based on the improved outlook for these markets, which has made mid-cap stocks more appealing for investment. The fund's increased allocation to these stocks reflects a strategic shift in response to the changing economic landscape. The manager's comments suggest that the fund is positioning itself to capitalize on the potential growth opportunities in these regions, particularly in the mid-cap segment. This strategy is part of a broader effort to enhance the fund's performance by focusing on sectors and regions with strong growth prospects.

The manager's many bets have paid off. The fund, managed by the manager, has seen a cumulative return of 11% over the past five years, ending in May. Since the second half of last year, the fund management company has been betting on some mid-cap stocks in China and Japan. Shortly after the German government announced a historic spending plan, the company bought German mid-cap stocks in March.

The manager believes that in a world of disrupted trade and globalization, focusing on more "domestic revenue" makes sense. The manager further pointed out that the German stock market should rise because it will benefit from the German government's landmark shift towards increasing fiscal spending and focusing on domestic demand. Meanwhile, the manager stated that Japan is undergoing a once-in-a-century transformation, with "good inflation" spreading throughout the economy, and mid-sized enterprises may benefit the most from the growth in domestic consumption.

Additionally, Fidelity is optimistic about Chinese companies, as China may implement further fiscal stimulus measures. Many investors are currently preparing for the July 9 deadline set by Trump for a "tariff suspension period." If no trade agreement is reached with the United States by then, "reciprocal tariffs" will take effect. Tensions in the Middle East could also pose a significant challenge to the stock market, as Israel's conflict with Iran escalates and Trump decides within two weeks whether to strike Iran.

However, Fidelity remains steadfast in its belief. The manager believes that these stocks are still worth buying. Since April 2, the MSCI Japan Mid Cap Index has risen by more than 4%, while the German DAX Mid Cap Index has risen by nearly 6%.