CIO Outlook: The global rewiring is underway

From shifting tariff regimes to the end of US exceptionalism, and the real-world impact of AI - markets are being reshaped in real time. Staying ahead means understanding how these forces connect - and how they’ll affect long-term wealth outcomes.

Fidelity’s Global Equities CIO, Niamh Brodie-Machura, joins Lukasz de Pourbaix to unpack what this global rewiring means for investors:

The global policy and economic reset underway
Why diversification is more important than ever
Where AI disruption is already driving productivity gains
And whether US exceptionalism still holds up

The rules are changing — are portfolios ready?

Apple Podcasts Spotify

This episode was recorded 18 June 2025.

Transcript

Read full disclaimer

This webpage is issued by FIL Responsible Entity (Australia) Limited ABN 33 148 059 009, AFSL No. 409340 (‘Fidelity Australia’). Fidelity Australia is a member of the FIL Limited group of companies commonly known as Fidelity International.

Prior to making any investment decision, investors should consider seeking independent legal, taxation, financial or other relevant professional advice. The information contained in this webpage including any linked webcasts or podcasts is intended as general information only and has been prepared without taking into account any person’s objectives, financial situation or needs. You should also consider the relevant Product Disclosure Statements (‘PDS’) for any Fidelity Australia product mentioned in this document before making any decision about whether to acquire the product. The PDS can be obtained by contacting Fidelity Australia on 1800 044 922 or by downloading it from our website at www.fidelity.com.au. The relevant Target Market Determination (TMD) is available via www.fidelity.com.au. This webpage including any linked webcasts or podcasts may include general commentary on market activity, sector trends or other broad-based economic or political conditions that should not be taken as investment advice. Information stated about specific securities may change. Any reference to specific securities should not be taken as a recommendation to buy, sell or hold these securities. You should consider these matters and seeking professional advice before acting on any information. Any forward-looking statements, opinions, projections and estimates in this webpage including any linked webcasts or podcasts may be based on market conditions, beliefs, expectations, assumptions, interpretations, circumstances and contingencies which can change without notice, and may not be correct. Any forward-looking statements are provided as a general guide only and there can be no assurance that actual results or outcomes will not be unfavourable, worse than or materially different to those indicated by these forward-looking statements. Any graphs, examples or case studies included are for illustrative purposes only and may be specific to the context and circumstances and based on specific factual and other assumptions. They are not and do not represent forecasts or guides regarding future returns or any other future matters and are not intended to be considered in a broader context. While the information contained in this webpage including any linked webcasts or podcasts has been prepared with reasonable care, to the maximum extent permitted by law, no responsibility or liability is accepted for any errors or omissions or misstatements however caused. Past performance information provided in this document is not a reliable indicator of future performance. The webpage including any linked webcasts or podcasts may not be reproduced, transmitted or otherwise made available without the prior written permission of Fidelity Australia. The issuer of Fidelity’s managed investment schemes is Fidelity Australia.

Neither Fidelity Australia nor Fidelity International warrants or guarantees that this website, any webcast, podcast or video, and the server which makes it available is free from malware, viruses, worms or other harmful computer software or technology. Any links provided to third party websites are provided for your convenience only. Fidelity Australia does not endorse or otherwise approve the views, products or services of those third parties or warrant or guarantee the accuracy, completeness or currency of the information contained in these third party websites.

Lukasz de Pourbaix (LDP)

Hello, my name is Lucasz de Pourbaix. I'm from Fidelity and today we have a special guest that I'm very keen to have a good chat with. We've got a Fidelity CIO from our Equities franchise, Niamh Brodie-Machura, I'm trying to get the Polish in there, who has crossed the pond and is with us today and I'm really keen to hear about your insights, Niamh.

Niamh Brodie-Machura (NBM)

Hi, Lucasz. Lovely to see you. Glad to be here. Thank you.

LDP

So before we sort of get into sort of some of the nuts and bolts, always interested to find out about, you know, how you got into the finance industry. Everyone sort of has different journeys. How'd you end up in the finance industry? I mean, you've been with Fidelity for 15 plus years, across multiple different areas, a lot of expertise. How'd that journey start?

NBM

Sure. My mum was actually in finance and accounting when I was a kid and we talked about career paths and she recommended economics as an area that can be interesting in terms of understanding the world, understanding people. So that's what I studied in college, and then I found books on investing and they were for me the most fascinating thing I had read to that point and I came to understand that the world of investing is a huge puzzle with so many different parts that I find it really challenging. And then I find the area of asset management where it can be really purposeful for our clients. So for me, it was all of those things coming together.

LDP

Absolutely, and it's actually quite pertinent in terms of what we're discussing today 'cause the world today feels like it's a lot of different places in a complex puzzle at the moment and maybe getting even more complex. But maybe a good point place to start is thinking big picture, a bit about the world, the macroeconomic environment, and if we sort of think about what we've sort of witnessed in recent times, we've had, you know, things like tariffs, geopolitical events around the globe, you know, talks of trade deficits in the US, a whole bunch of different moving parts, which seem to be sort of gaining a lot more momentum in recent times. How do you, as a CIO and your investment team, how do you navigate an environment where there's a lot of news, a lot of noise, a lot of moving parts and what should we be focusing on?

NBM

Sure, thanks for the question Lucasz. I would start by saying that volatility is par for the course for investors, and particularly investors in equities. But at the same time in recent years we've seen really a reduction in volatility until, as you've said, 2025. In 2025, we really have this new environment and it's been driven by changes on the macro side, changes on the policy side, changes on the policy indication side, changes on the geopolitical side. So what do we do as a team to navigate that, to make sure that we still have the best positioning for clients? So I'd say, firstly, we do think about the big picture. You can't ignore it because that is really important in terms of every individual region, every sector, every company, every security that you're looking at. So we do think about the economic outlook and we stay really closely connected to our peers that are specialists in that, that are looking at what the GDP growth expectations are, what the different scenarios look like, what inflation will be. And then we look at scenario analysis. And when you have uncertainty, you need to be really, really clear on what are the most important drivers now, they may be different to a year ago, and we work through what does the new bull case look like, what does the new bear case look like? and then you need to try to calibrate who's resilient through different environments, whether it's tariffs, whether it's spikes in the oil price, whether it's changes in macro and rates, and our team will calibrate, will recalibrate, and will try to find the best risk opportunity for our clients.

LDP

Yeah, it's a good it's easy sort of to think of the world as in a black and white, but there's a lot of grey, so that sort of scenario-based approach makes a lot of sense.

And if we sort of focus in on one of the areas that obviously has got a lot of the media attention, a lot of governments focus policy, talked about policy, is around tariffs. And it does seem like it's a bit of a moving target at the moment in terms of what that policy will look like in the future. So from a bottom up perspective, how are companies dealing with this uncertainty thing? Because we do have a large pool of analysts that are really looking at companies across the globe. What are they hearing from companies?

NBM

Sure. So I think let's start by what we know about the tariff trajectory from 2025. The first thing we know for sure is the tariffs are going up. It doesn't look like they're going up to the degree that was indicated on Liberation Day, but still our macro team are looking at a burden from the US going from two and a bit percent to over 14 percent, which is a drag in terms of growth and also additive to inflation, so that's certain - the total tariff burden is going up. The second thing we know is, as you've rightly said, there's a whole lot of uncertainty, I mean, even with the change in indication we still don't know what the cost of doing business will be across the major trading regions of the world. We have delays, we have indications that they're going up, we have them taken back, we have sectors being taken out. So when you take those two things together, when our analyst team is speaking with companies either live one to one or when they're speaking with them at conferences, when they're checking in as we do on a very regular basis, what are they hearing? What are they indicating to us? Both of those factors are having an impact. So what does that mean? That means that companies are really needing to think about their supply chain. They're really needing to think about their investment decisions. They're really needing to think about their competitive position against other companies in the industry, if they make this incremental change decision. So one really interesting aspect that's coming out from from our research team is that the developed economies, they're actually more concerning rather than emerging economies. Now, this is an interesting Point coming out from our team because going into the election in the US last year we have thought the most vulnerable area might be emerging markets, but actually we're hearing that there is more comfort more flexibility there to actually deal with the potential changes on the tariff front, while in the developed world there's more concern.

LDP

So if we then sort of think about the developed world, notably the US, because the narrative over the last couple of years has been really that, you know, this concept of US exceptionalism, effectively, that the US have got such a competitive advantage in so many areas. And we saw that in the data, if you look at the growth projection between the US and the rest of the world, the US was clearly ahead. With all these changes, changes in policy, this discussion of tariffs, where it all ends up, are we at the end of US Exceptionalism?

NBM

I think this is the trillion-dollar question that many market participants are asking right now. So if we think about the leadership from the US over the rest of the developed world, the developed markets over the last 15 years. What has driven that? Okay, it's been partially a combination of the US outgrowing the rest of the world, just from a GDP growth perspective. It's not true versus economies like China, for example, but it is true against the other developed markets. But even more importantly, has been the growth in profitability returns on capital that you've seen in the US. And that's really been driven by the hyperscalers, the largest companies now in the S&P, the tech companies, the comms companies, those companies have really seen earnings growth driving the whole market higher. So do we have confidence that that will continue going forward? Well, if you think about this from a multi-year perspective, from a decade perspective, those companies are extremely well protected from a moat perspective. They're wonderful in terms of their market share, but are we certain that they continue to have that innovative edge? Are we certain that they're going to have readily available capital to support them? Are we certain that they're going to remain the destination for talent from all over the world? I think you can reasonably ask questions about all of those points. So then that means the assumption that those returns will continue to outstrip the rest of the world, that the growth will continue to outstrip the rest of the it starts to become a little bit more tenuous. So from our side, it then causes us to reflect on the rest of the world and whether our expectations there are getting better and worse. And actually in Europe, we now have a supportive fiscal environment with Germany indicating that it's ready to spend on infrastructure, on defence, I mean that's a really important development from that country. We have a supportive monetary environment. We have better cohesion across Europe in terms of working together, reducing bureaucracy, trying to push forward towards a more innovative environment for companies. All of those things are positive and you have a reasonable valuation. You have good cash flows. So there looks to be a pretty good setup for Europe. And again, then when you look at emerging markets, you have a combination of attractive valuations, some benefit actually from the dollar weakness that we started to see coming through, and a really interesting innovative cycle starting to emerge in China now, starting to emerge. I make it sound as if it wasn't there before, but the point is the reinvigoration that we've seen in 2025 of actual delivery of new interesting products that could be potentially leaders on the world stage, that's really new and exciting. So I think there are reasons to be more optimistic about different parts of the rest of the world. So from my perspective, I do think it's worth investors looking across the global landscape and being diversified across it, thinking, yes, it is right, obviously, to have US exposure given the calibre of companies there, given how important it is in a world context, but also having a good allocation to other regions across the world.

LDP

I mean, your comment around diversification is very pertinent because it does feel like at the moment, particularly in a period of volatility and uncertainty, it is probably the one free lunch out there is diversification and certainly to your points around some, you know, whether it's Europe or China, you know, some of them have been a little bit unloved in recent years, but the market is evolving and hence it, again, for me it sort of resonates because it because it means having that broad global footprint is very important to be able to identify those opportunities across the world, across different regions.

If we sort of round it up in terms of the market, I mean, one of the thematics we've sort of has been thread through our discussion at the moment is volatility. And from an investor perspective, volatility can be viewed in two ways. It can be scary, as in it can paralyse people, but also it can be a period of opportunity. And if you sort of reflect on your sort of career, I mean, is this period of volatility, is it different from what we've experienced before? And are you, do you see it as an opportunity or threat?

NBM

It's a great question. When I reflect back on many years in the markets, looking at equities, there have been many crises. There's been the Asian crisis, there's been, you know, the GFC, which was, you know, a really, really cataclysmic event within the markets. We've had the pandemic more recently. Volatility, as I said at the outside, it really is part of it. Our perspective on this is that it is part and parcel of being invested in the highest return part of the market over time. The equity market is completely plugged in to the growth of corporate sectors, and if done well, it's plugged into the growth of the most attractive parts of the global corporate world, at attractive valuations. So those higher returns come with volatility. But for the patient over time, that compounds into really attractive returns. I believe it was Warren Buffett who said that the investing market is a way of transferring wealth from the impatient to the patient. So, I mean, from our perspective as active investors, we're quite willing to take that volatility on board and to use it as on the one hand an opportunity to find active ideas and then the other side to understand it as something that you need to bear through on the way to returns over time.

LDP

Yeah, absolutely. I mean, I think volatility is can certainly be a friend, particularly if you have an active approach and certainly that's sort of I guess, Fidelity sort of DNA in terms of active management.

Now, if we sort of pivot beyond, I guess, the markets and some of the macroeconomic news and some of the bigger picture themes that we're seeing in the market. And one that's certainly captivated many people in recent times and no doubt will continue to is artificial intelligence, AI. And it's driven a lot of stocks in the market in recent years as thematic. But if we if we sort of think about it from our lens, I mean, what are the possible implications of AI? What's what's sort of the long what's your view in terms of what role? Where does it go? Where do we end up with AI? It's a big question.

NBM

That's a very big question. And I know there are experts in San Francisco and many other centres of excellence around the world that spend many times debating this, and I'm wondering when we will get general artificial intelligence, when we will get super intelligence, what it means for the broader world. There have been a lot of work done on what it can mean for the employment market for different roles around the world. From our perspective, we're looking at it from many different layers. We're looking at it from the perspective of the companies that are directly involved in it, either on the hardware side or on the software side. We're looking at it from the perspective of the suppliers so if you think about the companies where you know in market terms we would call it the picks and shovels for AI - that's an area where we are very interested. The data centres that are required to power AI, the grid that is required to actually power them from an electricity perspective, that's an area where analysts have identified opportunities and and facilitated really great investment decision-making over time. We're looking at all of at all of that. And then separately I think we need to think about how the economy and how the human experience and the customer experience will change over time with the introduction of AI. How work-leisure balances will change and that will inform the development of different economies, different industries, different securities and all of our lives, frankly.

LDP

Yeah, absolutely.

NBM

So it's an area we're watching closely. We don't have all of the answers right now, but what we are hearing from our analyst survey is that there is increased implementation of AI within companies and also encouragingly an increased evidence that companies are expecting AI investments to start paying off in terms of productivity gains.

LDP

And is Fidelity doing any research into AI in terms of its own processes, in terms of research and so forth? Are there anything of interest there that you can sort of point to?

NBM

We're looking to equip our team with productivity enhancing tools as a certain starting point, to enable people to really focus in on analytical edge, proprietary insights, getting out and kicking the tires with companies and having conversations with company management, but at the same time being able to absorb massive amounts of information and distill that into their investment decision making. So that's one area we're certainly looking at. We're also using all of our proprietary data and trying to understand what can we learn from that by looking at it in different ways.

LDP

Yeah, absolutely. I mean obviously there's where it ends up, but I guess there seems to be already the real, today applicability of AI and no doubt it will be fascinating to watch where it sort of ends up.

So I guess if we sort of round things off and we've covered a lot of ground, if we think about the year ahead, again, who knows where we'll be in six months time and so forth, but what are the things that excite you and maybe some of the areas which you're cautious around for the year ahead.

NBM

Sure. I think the one that excites me, it's going to be one where, it's not the edgiest part of the market, but it's the one where I think investors can sleep easy, and that is actually something to be excited about in this current uncertain environment. And that's global diversification and that's particularly global diversification in companies that have resilient cash flows, that have defensive balance sheets. And that do have interesting incremental return opportunities. So that's the kind of area that I would point to in terms of exciting areas going forward.

On what concerns me, frankly, it's the lack of discernment on the pricing of risk and the possibility that if we do get more unexpected policy announcements, unexpected effects on the fixed income market from policy announcements, or from unexpected developments on the liquidity side or from monetary authorities, if we get a sudden increase in risk premia around the world, that would be obviously a problem for markets when valuations, in some cases, are stretched.

LDP

Yeah, absolutely. And it's sound advice because, you know, whether it was the GFC or any other market event, that's sort of underestimating risk, in hindsight was always an important factor in some of those things. So very sound advice. But at the same time, also portfolio diversification, again, it's sort of it's one of those things that we continually talk about as an industry, but certainly at the moment it feels like that's a very important thing to focus on.

So look, Neith, thank you very much for your time. Thank you for your insights. Great to sort of have you in Australia and able to do the podcast and safe travels.

NBM

Thank you, Lucasz.

20 June 2025

Macro Outlook