Mid-caps the place to be in a soft landing: Fidelity

While some investment houses have argued that 2024 will mark a reckoning for financial markets in this COVID era, Fidelity International argues that the year will, more than likely, simply be a continuation of 2023 and the "immaculate disinflation" narrative. 

But whether central banks will actually nail the soft landing is still yet to be seen. And although the likelihood has increased, and markets are pricing like it's a done deal, it's not by any means a sure bet. 

In this Rapid Fire interview, Fidelity International's Global Chief Investment Officer Andrew McCaffery answers five of our most burning questions. Hear his thoughts on where he expects to see the best cross-asset returns this year, his preference within equities, and his advice for any investor who is still nervous about the year ahead. 

EDITED TRANSCRIPT

Hans Lee: Alright, Andrew McCaffery of Fidelity International, this is the Livewire Rapid Fire. I've got five questions. Are you ready to go?

Andrew McCaffery: Yes, fire away.

Lee: What is the biggest change coming to markets in 2024?

McCaffery: I think it's less about big changes. It's more about the continuation of disinflation to start the year and the excitement that will continue to create for financial markets of a soft landing.

Lee: On that note - True or false - central banks will nail the soft landing and rate cuts will be done in an orderly fashion this year.

McCaffery: We will believe that they have a chance of doing it but ultimately they will struggle.

Lee: OK, so true or false?

McCaffery: False

Lee: Out of large-cap, mid-cap and small-cap - Where do you expect the most opportunities to come from in equities this year?

McCaffery: Mid-caps will be very exciting if we see the soft landing play out, versus large and small-cap.

Lee: Out of the US, Developed Markets outside the US, and Emerging Markets, where do you expect to see the best cross-asset returns from a geographical standpoint? 

McCaffery: I think that I would be very excited by the ongoing gains from the structural benefits of Japan changing their deflationary psychology. And I think that Europe has a positive supply story that will play back into equities because of where multiples of earnings are today.

Lee: Give us a one-line piece of advice for those who are nervous about the various risks that exist in markets this year.

McCaffery: Stay focused on what the positive forces are at this stage, that still have to play out, and be nimble and think a little bit more tactically as the year progresses.

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