Fidelity Emerging Markets Multifactor ETF employs a multifactor strategy emphasizing valuation, quality, momentum, low volatility, and low U.S. equity correlation. FDEM has outperformed EEM in value, earnings growth, return, and risk metrics since inception. Despite a low expense, FDEM lags in total return and risk-adjusted performance versus comparable multifactor ETFs.
Ex-U.S. equities have performed well for investors this year. Many investors and advisors entered 2025 looking to move from underweight to neutral or even overweight foreign equities positions.
Uncertainty looms over markets in any year, but 2025 may prove exceptionally so. A particularly unpredictable policy outlook in the United States, shifting sometimes week to week, clouds the future and limits the ability for firms to plan.
In the current environment, characterized by heightened volatility, now is the time to focus on greater portfolio diversification. The diversifying power of bonds has waned, underscored by bonds' correlation with equities during the recent market sell-off.
Emerging markets have the potential to offer outsized returns, but many investors may find the inherent volatility of the asset class hard to stomach. Investors can navigate volatility in emerging markets by looking beyond traditional cap-weighted funds.
The market regime may continue to shift in response to easing rates, potentially serving as a catalyst for SMIDcap and mid-cap companies. The rate cut cycle is expected to provide more relief for smaller and more leveraged companies needing more access to capital markets than larger companies.
Market volatility remains a fairly persistent aspect for investors to contend with in the back half of the year. With elevated short-term volatility risks in the fourth quarter, Fidelity offers five ETFs worth consideration, including a screen for lower volatility stocks.
Factor investing allows for targeted equity exposure for those seeking specific investment outcomes. For example, factors may be used to enhance a portfolio's risk and return profile or help generate income.