by Pierre Daillie, Managing Editor, AdvisorAnalyst.com
The art of capital allocation is an unforgiving pursuit, where mistakes are penalized and only the nimblest investors survive. At Fidelity Investments' Vision 2025 event, January 22, 2025, portfolio managers Hugo Lavallée, Mark Schmel, and Dan Dupont1 took the stage to offer their candid assessments of the market landscape, reflecting on a year that defied logic, rewrote the playbook, and—if history is any guide—set the stage for another period of high-stakes decision-making.
When Everything Works, Be Wary
Mark Schmel had what can only be described as a career year. “I managed to make money in virtually every group, which almost never happens,” he remarked, an admission that should send a shiver down the spine of any seasoned investor. When everything works, something is wrong.
His biggest winners? Crypto, AI, and high-momentum tech stocks. “MicroStrategy was a home run,” he said, referring to Michael Saylor’s leveraged Bitcoin vehicle that has become the public market proxy for digital gold. AI, too, was a tidal wave he rode skillfully, exploiting what he called an “information edge” gleaned from his proximity to the Silicon Valley venture ecosystem.
Schmel isn’t naïve, though. He knows that when the tide rises so uniformly, investors should be wary. “I hope this year is half as good,” he said, signaling that he isn’t banking on a repeat of 2024.
The Contrarian's Curse
For Hugo Lavallée, 2024 was a lesson in what happens when you zig while the market zags. “Not enough AI, too many dollar stores,” he admitted. Lavallée is a self-described contrarian, someone who relishes buying when others are panicking. “My best generals do the ordinary in extraordinary times,” he said, invoking Napoleon’s philosophy.
That approach didn’t work in a year where momentum and speculation reigned supreme. But Lavallée isn’t about to abandon his playbook. He’s adjusted, refined his process, and is bracing for what he calls a “volatility party that we’re all invited to.” Translation? Expect market dislocations, and don’t be afraid to wade into the mess.
The Reluctant Bear
Dan Dupont played defense while the market went on offense. “Large cap had a decent year, but my long-short fund was really tough,” he admitted. His process—value-driven, downside-focused—was not in vogue, though he found selective opportunities. “I was in China a little bit,” he noted, pointing to a rare pocket of underappreciated value.
Dupont is the first to acknowledge that his style doesn’t shine in euphoric markets. But markets don’t stay euphoric forever. “At some point, my presence will be very required,” he said with a smirk, signaling that the frothy exuberance of 2024 may soon find its limits.
The AI Gold Rush: Still the Biggest Trade Ever?
Schmel remains a true believer. “We’re only using 10% of AI’s functionality. This is the year where we figure out how to apply it,” he said. The real opportunity? Not the chipmakers building the infrastructure, but the startups leveraging AI to eliminate mundane tasks. “I’m more interested in seven people in a garage going after a boring task than in big boxes in the desert.”
The message is clear: AI isn’t a trade; it’s a secular shift. If you think the boom is over, you haven’t been paying attention.
The Speculative Inferno: Crypto, Meme Stocks, and ‘Grifty’ Trades
Dupont isn’t convinced. “Right now, crypto trades more like the Nasdaq with a beta of two than like gold,” he argued. To him, Bitcoin is a speculative vehicle, not an alternative monetary system—at least not yet.
Schmel, on the other hand, played it masterfully. “Bitcoin wouldn’t go down, even when everything was against it,” he noted, highlighting the asymmetric setup he exploited. But he also acknowledged that the trade has moved into late innings. “Do I know when to sell it? No.”
The Forgotten Asset Class: Commodities
If AI was the biggest trade of 2024, could commodities be the biggest trade of 2025? Schmel and Lavallée think so. “Gold shouldn’t have been working last year, but it did. That tells us something,” Schmel mused, hinting that inflation and monetary debasement may not be as transitory as central banks claim.
Lavallée, ever the pragmatist, sees opportunity in volume-based plays. “Can we find businesses exposed to quantity?” he asked, pointing to pipelines, royalty companies, and infrastructure plays.
Energy and materials have been left for dead over the past decade. That may be about to change.
The Value Rotation: Is It Finally Here?
Dupont has been waiting for his moment, and he thinks it might finally be arriving. “Valuation discrepancies are extreme,” he argued, pointing to how cheap Europe and emerging markets have become relative to the U.S. “I bought a stock in Korea, a company in Brazil, and more in Japan. Everything is hitting my price point.”
Is this the great reversal? A reallocation from overvalued U.S. equities into underappreciated global assets? If so, Dupont may be the biggest beneficiary.
Final Thoughts: Staying in the Game
The Fidelity trio closed with a powerful message: investing isn’t about getting every call right; it’s about staying in the game.
“If you want to compound capital over the long run, you need to make it to the last five years, when all the compounding happens,” Lavallée concluded.
Markets will ebb and flow. Trends will shift. But those who can allocate capital with discipline, adapt without losing conviction, and keep their emotions in check will be the ones left standing.
And as history has shown, those left standing tend to win.
Footnote:
1 "VISION 2025: Diversifying your equity strategy with Global Equity+ Fund – Mark Schmehl, Dan Dupont and Hugo Lavallée | FidelityConnects." 5 Feb. 2025, https://fidelitycanada.podbean.com/e/vision-2025-diversifying-your-equity-strategy-with-global-equity-fund-%e2%80%93-mark-schmehl-dan-dupont-and-hugo-lavallee.
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