Dirk Hofschire of Fidelity Investments - Investing in the Face of a Global Economic Downturn

Nov 23, 2021

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The world is changing and it's time to change with it. As global debt and inflation rise, how can investors navigate the challenges of the global economy?

In today’s episode, Rusty and Robyn talk with Dirk Hofschire, Senior Vice President of Asset Allocation Research at Fidelity Investments.

Prior to joining Fidelity, Dirk was a foreign service officer for the U.S. Department of State and a financial economist for the Bureau of Western Hemisphere Affairs. As he traveled the world, he developed an interest in economics.

Dirk talks with Rusty and Robyn about the risks of rising global debt, how investors can stay ahead of an unsustainably challenging economy, the business cycle, and other risks to the global economy.

Key Takeaways

[5:16] - Dirk Hofschire’s role at Fidelity Investments.
[6:58] - How multi-time horizon asset allocation works.
[8:18] - Why analyzing the business cycle is important.
[12:48] - Why debt has ballooned so much around the world in recent years.
[18:01] - What investors need to remember when dealing with a highly-indebted world.
[26:31] - How professional investment managers view government as a larger part of the global economy.
[35:24] - Dirk's perspective on digital assets.

Quotes

[19:12] - "Diversification is obviously the bread and butter for long-term portfolio building. But over the past 10 or 15 years, it would've been very easy to learn the opposite. If you had owned a US dominant 60-40 portfolio, that’s all you needed. So the diversification in part is against inflation, but it’s actually much broader than that. It's against the sort of extreme events with policy that could mean a much weaker dollar." - Dirk Hofschire

[27:54] - "When you think about government regulation and you just think about government policy being more involved in general, I'm not worried that the US is going to become a socialist country by any actual meaning of the term. But what I do worry about is when you sum up all the different things that are happening, all of those things have the potential to seep into reducing corporate profitability, potentially acting as a drag on growth, or potentially being more inflationary, but maybe not. But at the bottom line, it's hard to see how this is positive for profits." - Dirk Hofschire

[29:49] - Some of the things like shorter duration on the bond side, or on the stock side, commodities and traditional hedges, as well as some of the things like real assets, real estate and gold, and other types of commodities—those will all still be pretty good inflation hedges. Even if they get expensive, they should still hedge, somewhat, that surprise of potentially even higher inflation or greater inflation that's already priced in." - Dirk Hofschire

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