Corporate earnings remain the strongest force supporting the stock market as investors deal with the war with Iran and the risk of higher inflation. Fidelity Emerging Markets Fund (FEMKX) is one investment I like here, says Brian Kelly, editor of MoneyLetter.
The second quarter earnings season has started on a strong note, with most S&P 500 Index (^SPX) companies reporting results above expectations. Although part of the headline growth rate reflects a large one-time gain reported by Alphabet Inc. (GOOGL), underlying earnings are still growing at a rate of more than 20%.
Fidelity Emerging Markets Fund (FEMKX)
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Source: TradingView
Revenue growth has also remained healthy, which suggests that companies are not improving profits only by cutting costs. Businesses are generally selling more products and services while maintaining strong profit margins.
Artificial Intelligence remains the main driver of earnings growth, especially for semiconductor companies, computing equipment makers, data centers, utilities, and industrial companies. Technology and semiconductor profits are rising much faster than those of the overall market.
However, earnings growth is beginning to spread beyond a small group of large technology companies. Most S&P 500 sectors are now reporting higher profits, and all 11 sectors are reporting revenue growth. This broader growth is important because it makes the market less dependent on only a few AI-related companies.
As for FEMKX, the fund invests normally at least 80% of assets in securities of issuers in emerging markets and other investments that are tied economically to emerging markets. It invests normally in common stocks and allocates investments across different emerging markets countries.
