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Wymer: Stock Market Pullback Possible This Year

Stock market fundamentals are healthy, but recent strong returns are unlikely to continue, says Fidelity Growth Company manager Steve Wymer, 2017 Domestic-Stock Fund Manager of the Year.

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Katie Reichart: I'm Katie Reichart with Morningstar. I'm here with Steve Wymer of Fidelity Growth Company. He's Morningstar's Domestic Stock Fund Manager of the Year. Steve, congratulations and thanks for being here.

Steve Wymer: Thanks, Katie. Glad to be here.

Katie Reichart: After such a strong run for equities the past few years, and especially in 2017, how are you thinking about the portfolio heading into 2018?

Steve Wymer: The economy seems to be strong in the U.S. and perhaps picking up some steam. The international economies, for a change, are very strong all around the globe. It looks fundamentally very strong. Stock valuations are a little higher than they used to be, but the fundamentals are strong. Where the market goes, we had a strong market last year. We're very strong year to date. With some of the indexes up high single digits already, we don't expect that to continue. Usually we get some pullbacks along the way, and I'm sure we'll have some this year.

Katie Reichart: Do you expect to see some tailwinds from tax reform?

Steve Wymer: I think tax reform is very positive for our economy. We're going to see probably more investment from the companies that are out there. They're clearly bringing more down to the bottom line and we'll see how they spend it.

Additionally, we're also seeing foreign companies step up their investment in the United States where their tax rates have gone down low and with the weakening dollar things in the United States look a little bit more attractive than they used to for them, too.

Katie Reichart: Biotech's been a big part of the portfolio throughout your career and an area where you've had a lot of success. How are you thinking about that part of the portfolio and any particular names that you're excited about now?

Steve Wymer: We've done well with biotech in the fund and one of the ways that helped us do well is taking a portfolio approach because there's a lot of risk in this area even though these companies are innovating, but there's a lot of clinical risk and there's a lot of regulatory risk, and even how well competition will do in the marketplace or how that stock will do in the marketplace.

What we do is we balance that risk out over time because these stocks can have some ups and downs as they try to move their products forward.

Katie Reichart: And Alnylam I know is a top contributor last year, but that hasn't always had a smooth path while you've owned it.

Steve Wymer: It's not an overnight success, but they're on the brink of launching their first drug in 2018. It's a company we think has a nice pipeline behind it, so Alnylam was a strong contributor last year, and hopefully will be a strong contributor in the years ahead.

Katie Reichart: Great, well Steve, thank you so much for being here.

Steve Wymer: Thank you.

Katie Reichart: I'm Katie Reichart with Morningstar.

Katie Rushkewicz Reichart does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.