How Paul Taylor stacks the odds in his favour across market cycles

This article first appeared in Livewire markets on 21 March 2023

If there’s one certainty in markets, it’s uncertainty. Market cycles come and go. Crises come and go. There’s nothing like being in the moment of a crisis to forget that it’s not a unique threat. That’s not to say all crises are the same, but there are similarities and often as not, the same rules for managing volatility apply.

It’s worth remembering as we continue to unwind the challenges of inflation and a rising interest rate environment globally.

Paul Taylor, head of investments for Fidelity Australia and Portfolio Manager for the Fidelity Australian Equities Fund, has worked through 10 crises in his 26-year career. It’s safe to say he’s learnt a lot about managing volatility in that time, but he points to lessons from his first crisis, the 1997 Asian crisis, as being particularly formative.

He says it comes back to hard asset valuations.

“Whether it’s price-to-book, price-to-net tangible assets, enterprise value-to-sales, enterprise value-to-order book, that’s a really basis level. If it’s hitting those trough levels and they’ve got the balance sheet, you just need to step off the cliff,” says Taylor.

It’s no different today, and Taylor believes there is a lot of opportunity in the Australian market for those prepared to look towards the longer term.

In this interview, Taylor shares his lessons through market cycles and in the 20-year history of the Fidelity Australian Equities Fund, his expectations for equities across the year and his highest conviction positions for the year.

Note: This interview was recorded on 8 March 2023.