Top 3 Fidelity Stock ETF Picks for 2026

Core Insights - Fidelity offers three ETFs that focus on quality, dividends, and emerging markets, which are expected to perform well in 2026 [1][4]. Group 1: Market Trends - As 2025 concludes, equities remain dominant, led primarily by a narrow group of technology and communication services stocks, particularly the "Magnificent Seven" [2]. - The AI boom has significantly contributed to market gains, but signs indicate a potential rotation in market leadership [2][3]. - Various sectors, including cyclicals, healthcare, and international stocks, have shown strength over the past six to twelve months, suggesting a broader investment opportunity [3]. Group 2: Fidelity Quality Factor ETF - The Fidelity Quality Factor ETF (FQAL) targets large, financially healthy companies based on free cash flow margin, cash flow stability, and return on invested capital [6]. - The ETF's top five holdings include Nvidia, Apple, Microsoft, Alphabet, and Broadcom, indicating a strong tech focus [6]. - FQAL is positioned to perform well regardless of market conditions, providing exposure to tech while maintaining a high-quality portfolio [8]. Group 3: Fidelity High Dividend ETF - The Fidelity High Dividend ETF (FDVV) has performed well due to its significant tech holdings, despite its name suggesting a pure high-yield focus [9]. - The ETF employs a strategy that scores stocks based on dividend yield and market value, leading to top holdings in major tech companies [9][10]. - Similar to FQAL, FDVV's tech exposure can benefit from continued market momentum, while its allocations to cyclicals and defensive sectors offer protection against downturns [11]. Group 4: Fidelity Emerging Markets Multifactor ETF - The Fidelity Emerging Markets Multifactor ETF (FDEM) focuses on companies with attractive valuations, strong quality profiles, positive momentum, and low volatility, addressing concerns about investing in emerging markets [13][14]. - The IMF projects a 4% growth for emerging markets in 2026, compared to 2.1% for the U.S. economy, indicating a favorable outlook for FDEM [16]. - FDEM's price/earnings (P/E) ratio of 13 is significantly lower than that of the S&P 500, suggesting that emerging markets are currently undervalued [16].