Denise Chisholm's sector and factor perspectives – March 5, 2026

In this episode of FidelityConnects, host Pamela Ritchie welcomes Denise Chisholm, Fidelity's Director of Quantitative Market Strategy, to discuss the impact of current geopolitical tensions—particularly rising oil prices due to Middle East instability—on global markets. Chisholm argues that while energy shocks are disruptive, historical data shows they rarely lead to sustained inflation or long-term Fed tightening, especially in the U.S., where structural advantages like energy self-sufficiency and lower energy spending have insulated the economy. She emphasizes that international equities, particularly in Europe and Japan, remain a 'value trap' due to persistently weak earnings growth, even when trading at cheap valuations. In contrast, U.S. equities, especially in technology and industrials, show stronger fundamentals and better risk-reward profiles. Chisholm highlights that the software sector, despite recent sell-offs, is now undervalued relative to its historically high operating margins, creating a rare and favorable dislocation. She also notes a nascent but durable recovery in U.S. industrial production, supported by tax incentives and lower interest rates, which could fuel a sustainable manufacturing rebound. Ultimately, she concludes that the 'Goldilocks' scenario—moderate growth, stable inflation, and manageable volatility—has the highest probability, making equities resilient despite ongoing shocks. The episode ends with a sector outlook: top picks are industrials, financials, and consumer discretionary (especially homebuilders), while consumer staples, utilities, and energy are viewed as underperformers due to cyclical headwinds and structural risks.