2025 Global Market Outlook: Investing During Transition

Ritu Vohora

Hello and thank you for joining us for T. Rowe Price’s Global Market Outlook, “Investing during transition.”

I'm Ritu Vohora, an investment specialist covering global capital markets. My role is to provide clients with a broad perspective into the views of our multi-asset, equity, and fixed income investors at T. Rowe Price.

2024 has been a remarkable year. The S&P 500 has hit 50 record highs and counting so far this year. Gold is on track for its best performance in 45 years, and bitcoin has crossed the $90,000 threshold. Meanwhile, bond yields have been on a roller-coaster ride, as markets have tried to anticipate policy shifts. The much anticipated rate-cutting cycle has begun, with 71% of global central banks cutting rates this year. But all eyes have been on the Fed as good progress on inflation and a softening of labor markets enabled a move to less restrictive policy.

In recent weeks, markets have also cheered a decisive end to political uncertainty in the race to the White House that had prevailed in the months leading up to the U.S. election. But with the prospect of higher tariffs and lower taxes under Republican government, what are the economic and market implications? To help us understand what this all means for asset markets as we look ahead to 2025, joining me in the London Stock Exchange studio today are:

Justin Thomson, head of International Equity and CIO. Welcome, Justin.

Justin Thomson

Thank you, Ritu.

Ritu Vohora

And another regular on this panel, Arif Husain, head of Global Fixed Income and CIO. Welcome, Arif.

Arif Husain

Right.

Ritu Vohora

And last, but definitely not least, Sébastien Page, head of Multi-Asset and CIO. Sébastien is also author of “Beyond Diversification” and a soon-to-be-released book on the psychology of leadership. Congratulations, Seb, on your new book, and welcome.

Sébastien Page

Thank you, Ritu.

Ritu Vohora

And it's great to have you in the studio with us in London. So thanks for being here.

Sébastien Page

Thanks. I’m excited to be here.

Ritu Vohora

We'll also be hearing from Steph Jackson, head of T. Rowe Price Investment Management and Blerina Uruçi, chief U.S. economist, who joined me from our Baltimore studio earlier this week to discuss the U.S. economy and the opportunity set in U.S. equities.

So let's kick into the conversation, and before we get stuck in, I just want to get a sense of your view as we look ahead to 2025. The Trump trade is in play. Stocks seem to be in euphoria. But when I look at bond markets, we're seeing high yields and a lot more volatility. So quick-fire round. Are you bullish or bearish?

Justin?

Justin Thomson

Well, when I started my career, we had a third dimension. We had lots of Scots in our office, we used to say, bullish, bearish, or Scottish. I would say Scottish, trending bearish.

Ritu Vohora

Scottish trending bearish. Arif?

Arif Husain

I think both. Uncertainty is high. We're going to see a lot of volatility.

Ritu Vohora

OK, and Seb?

Sébastien Page

Wait, you're both bearish and bullish?

Arif Husain

Of course.

Sébastien Page

OK. I'm moderately bullish.

Ritu Vohora

OK, that’s interesting, and it’s an interesting perspective, not to have a consensus view, because when you look at the broader market narrative, the bullish consensus is pretty much broad-based. And we were at the UK conference here in September when the Fed had just cut by 50 basis points. It was the big news and you said the Fed is eye-catching, but it can be deceiving. What really matters for markets is going to be the U.S. election. Now that we have a result, what's your outlook on markets?

Arif Husain

I think I'll stand by that statement. So, we'll talk a lot about the Fed today, but they are largely on autopilot. They're kind of boxed in. They did their eye-catching 50 basis points and then were shocked as data started to accelerate. So they're on autopilot, let's say, for the Fed for a little while.

And in terms of the U.S. election, and go back to my previous answer, why I'm neither bullish or bearish at the moment, I think you're going to see extreme outcomes, essentially. And the reason I believe that is because we now have, we know the result of the election. You've got this clean sweep.

You've also got China stimulating. You've got Japan doing quantitative tightening. There's a lot going on in the world, as well as some of the geopolitical events happening. So I think that area of volatility uncertainty, even though we've got the results of the election, is still very, very high.

Now, in terms of that election, you have a clean sweep, right? So there is no real control, there's no opposition. What is the limiting factor? I think the market’s going to play that role. So the Trump trade is alive and well, until it isn't and the market rebels back against it. So for me, I think it's really important to focus on the signal rather than the noise and unfortunately, we're going to see a lot of noise, very little signal, certainly over the next two to three months. So very, very important it fades any extreme in the markets and really, just look at what really is going on underneath all the noise.

Ritu Vohora

That's a really good point. I think if investors take away, it's so easy to caught up in the headlines, but focusing on the fundamentals is really going to matter.

So coming to you now, Justin, Arif talked there about China sort of easing policy, and we've seen more recently they have shifted to provide some stimulus to help support the economy, but we haven't seen the fiscal bazooka, particularly given a Trump win, and that's kind of dampened the mood in China. How do you see the role of China playing out in the global economy?

Justin Thomson

I would say China is too big, both from the demand side and the supply side, not to be intertwined with the global economy. Those supply chains are so sophisticated, so cost-effective, so important for the rest of the world, that China will remain a huge part of the global economy.

That said, going forward, we're going to have to get used to a China that doesn't grow at 5%, 6%, 7%. China grows at 2%, 3%, 4%, and that's a function of demographics. It’s a function of household formation. And most importantly, it's a function of what they need to do, which is a change in business4model from a fixed capital-led to a much more and export-led economy to stimulating their own consumer demand.

Ritu Vohora

OK. And that's something to watch in 2025. And I think, Arif, in the past you've mentioned China’s actually exported deflation to the rest of the world, and that could potentially persist, which has ramifications for Europe and of course here in the UK as well.

Now let's take a closer look at the U.S. economic outlook with Steph and Blerina.

Ritu Vohora

Welcome, Blerina and Steph, thank you so much for joining us today.

Blerina Uruçi

Thank you, Ritu. It's a pleasure to be here.

Steph Jackson

Yeah. Same. Thank you very much.

Ritu Vohora

Great, well, let's get straight into it. Lots to talk about the U.S. economy. So Blerina, maybe I could start with you. The U.S. economy has continued to outperform the rest of the world for a number of years now and they've now delivered nine consecutive quarters of growth. And we've also just had the dust settle on the U.S. election with a decisive victory for Trump and the Republicans, and they're actually inheriting a very strong economy. So do you believe the U.S. exceptionalism can continue?

Blerina Uruçi

It's a great question, Ritu, and I would say that I remain optimistic about the U.S. economy. I think the ingredients are there for the economy to expand by about 2.5% in 2025, continuing the strong track record we've seen in the last couple of years.

And before I dig into the ingredients that I think are going to drive the economy and growth next year, let's for a moment pause and think about what do we mean by U.S. exceptionalism, and here we're talking about growth. So in the U.S., the economy expanded by about 3% over the last couple of years annually. And then when you compare that to other developed markets, such as in the eurozone, UK, or Canada, it's been about twice or three times as fast.

And so what have been the key ingredients for the growth in the U.S., and looking forward to 2025 I think the key is with the U.S. consumer. I think the U.S. consumer is about 70% of the economy, which means in the U.S., we have a large and closed economy. And why is that important? I think it matters because it means most of the demand that we need to generate growth comes from domestic markets. It makes the economy less exposed to a slowdown, say, in economies like China or the euro area.

And what drives the U.S. consumer is really the labor market. We have a strong labor market. The pace of job creation has slowed, but companies continue to hire, and we're not seeing signs of mass layoffs.

Couple this, let's call it job security for the consumer, with the fact that the balance sheets are healthy and we don't have any deleveraging ahead of us.

And on top of that, the fact that the wealth side of the consumer balance sheet is doing well, both in terms of housing wealth as well as the stock market, I think the ingredients are there to have the consumer continue to drive the economy in 2025. And then the other pillar that has made a difference for growth in the U.S. versus the rest of the world has been fiscal policy.

We have deficits of about 6% to 7% of GDP with the unemployment rate at a record low. You compare this with the fiscal impulse in Europe or in Canada, it's much larger in the U.S., and then projections are that it's going to continue to be at these levels for the next couple of years. So even though fiscal is not an incremental increased impulse, it's still supportive of growth, and I think, yes, we do expect the economy will remain resilient next year.

Ritu Vohora

OK, thank you for that, Blerina. That's a great summary, and we can always see the Trump trade in markets in recent weeks. We've seen the postelection surge with the U.S. equity market, the S&P 500 broke 6,000 for the first time. We've also seen small-caps rally very significantly on the hopes of tax cuts and deregulation. And of course all of this comes with the background of the Fed easing policy.

So standing here today, what's your outlook for corporate earnings and how are the companies going to navigate these changes? And given the animal spirits we're seeing in the markets, do you see any risks that maybe the market is not reflecting that could potentially generate volatility in 2025?

Steph Jackson

Thanks for the question. From an investment perspective, we really feel as though corporate earnings are going to be much stronger and are in a position to accelerate going forward, particularly in small-caps. It's not well known or well studied, but small-caps tend to be a fairly good inflation hedge in market environments characterized by lots of inflation, so we expect higher corporate earnings, although at this particular point in time, we feel as though their earnings estimates may be a bit high and are likely to come in lower. You're exactly right, animal spirits have clearly been released, and in those environments, stronger economic activity usually leads to better corporate earnings.

From a risk perspective, we would just say that investors need to ponder how much of the good news has been pulled forward in current valuations. And valuations are very high, we got there very quickly leading into the election and then post the election. Excluding the largest and riskiest names, we still think smid-cap represents sort of the best place to invest in in terms of opportunities. When you think about where they are from a valuation perspective, their valuations are very reasonable relative to history, relative to large-cap, and so we still think that smid-cap stocks have more upside potential than large.

Ritu Vohora

OK, thanks for that, Steph. But when I look across valuations across all sectors, they still look elevated. Is there still a case for U.S. equities to move higher from here, and you highlighted some opportunities, but where are probably the most attractive opportunities, be it by sector or by market cap?

Steph Jackson

Yeah, we believe that the bull case for stocks is much broader going forward, and small-caps and mid-caps look more attractive and generally do better in inflationary environments, as you point out. This is largely because of better pricing flexibility for smaller-cap companies. The average stock really, excluding the Mag Seven or the Magnificent Seven, is really only up about 10% to 11%. So you really have had a very concentrated market in terms of what is driving stock performance. AI names have really been on a tear and the capex spending has not slowed down there.

But we have much more attractive valuations when we look more deeply at down cap and elsewhere in different indices. Where the average stock looks more like 17 to 18 times forward earnings, versus 25 to 26 times for the overall index.

There's a bull case for several sectors—in particular, financials, where we think less regulation and the potential for loan growth that will be driven by an increase in economic activity will be very helpful to their bottom lines and also with less regulation comes the potential for more M&A activity, which tends to push premiums up for those financial stocks.

We think energy is going to be a particularly interesting area, and we think the outlook for liquefied natural gas-oriented companies is very good. And they also are an AI beneficiary, and so hopefully we'll begin to see some of the benefits of all the spending begin to show up for several energy companies. We also expect increased drilling activity and so many oil field services companies should begin to do better.

And obviously, no one has missed that crypto is hot again, and we think that's going to be an area of significant upside.

Selectively, some other stocks that we think are interesting or some other areas that are interesting, include financial tech and IT services. Both are areas that have fairly cheap valuations and have been at trough utilization rates, and also are long-term beneficiaries of AI. So we'll be on the lookout for some significant improvement and some of the productivity from the innovation in AI in those spaces.

More broadly, we do see a potential risk of some reversion to the mean for some stretched valuation areas in the market, particularly AI. It indicates more broadly that perhaps value can outperform growth. I know we've been saying that for quite some time, but we think that we might be approaching a tipping point.

Ritu Vohora

Well, thank you for that Steph and Blerina. We're probably at time now, so I want to close off the session with two questions for you. This is the speed round. So as we look ahead to 2025, what is the one risk that you're most worried about and where do you see the biggest opportunity? Blerina?

Blerina Uruçi

OK, so let's start with the risk and end on a high and positive note. I would say fiscal is probably the biggest risk that I foresee because of the size of the deficit and the potential that this could have on yields in the long end if we don't address the sustainable path of debt. And then the more positive note would be productivity growth. Steph already spoke about generative AI and how that can affect sectors other than tech. If this positive productivity shock shows up in the economy, it could have positive implications all around.

Ritu Vohora

And for growth as well as you outlined. So coming to you now, Steph.

Steph Jackson

I would say the biggest risk is unexpected inflation, which could have an impact on incomes, which sort of bleeds into topline as well as in corporate earnings, being disappointing. Of course, small-caps do tend to be a good inflation hedge and are more insulated than large-caps. Tied to that, the potential for a momentum reversal. That is, momentum stocks have done very, very well over the last year. There is a risk that, if you study history, that that does not continue and likely leads to value outperforming growth and this momentum-driven market to slow down significantly.

In terms of opportunities, there are several areas we're excited about. GARP stocks in general, which are growth at a reasonable price ideas at a lower beta but have reasonably good outlooks in terms of corporate earnings. And then there are several segments I talked about: small-caps and mid-caps, but I would zero in on energy. I would also highlight financials or banks, financial tech, as well as IT services, and then of course health care and select areas of software we still think are attractive.

Ritu Vohora

Great, thank you, Steph and Blerina. It's been a great conversation. And if I could summarize, looks like U.S. growth is going to be resilient, but there are risks around fiscal policy and inflation. But plenty of opportunities across a broad range of sectors. So thank you so much for joining us from Baltimore today and sharing your perspective. We appreciate your time.

Blerina Uruçi

Thank you, Ritu.

Steph Jackson

Thank you.

Ritu Vohora

Great. So, we heard from Steph and Blerina there and they outlined both the U.S. economic outlook and some of the opportunities, particularly in U.S. equities.And what do we think about EM more broadly? Obviously, we've talked about China sort of diversifying the supply chains. Where are the potential winners potentially in frontier markets?

Justin Thomson

Well, I mean, on the face of it, rising rates, stronger dollar, imposition of tariffs is a pretty heady cocktail, negative cocktail for emerging markets. But emerging markets have been here before, and emerging market policymakers know how to navigate such volatility.

And a lot will depend on the response. The response. Now, if it is a 60% tariff hike on Chinese-originated goods, you would need a 20% devaluation to offset that. But the losers on the face of it are going to be around the Pacific Rim, those that supply around China. Vietnam has been a big beneficiary of Chinese tariffs so far. I think there is headline risk there as well.

But remember, I mean, that's on the face of it, emerging markets compared to where we've been in history, foreign exchange reserves are very healthy, external balances are much better-positioned than we've been before, so I think that what the implications are from emerging markets are less obvious than might seem from a headline level.

Ritu Vohora

Yeah, and from the data I've seen, the U.S. consumer actually faces the bulk of the tariff in terms of higher inflation.

So coming to you now, Arif, Blerina talked there about one of the key risks is around fiscal policy. The U.S. deficit is on track to be 7% of GDP at the end of the year. I think the interest expense alone is going to be higher than the defense budget, which is mind-boggling.

When should we start worrying about the debt burden? I feel like we talk about it, but when do we actually start worrying?

Arif Husain

You should be worried right now. I think, certainly, the initial reaction in the bond market post-the election was to go after some of the fiscal laggards. So the European peripheral market got hit, the UK bond market got hit, and so did the U.S. Now there's been plenty of volatility, I think you’ve got to be worried about the bond market. I'm on record of saying I think the U.S. 10-year will get to 5%. I said that before the election. There's only more evidence, new information to believe that, and frankly, I said 5% because you need to go through 5% to get to 6%.

Ritu Vohora

And Seb, coming to you, given what Arif’s talked about, as an asset allocator, how should investors think about positioning for 2025? Are stocks still going up in the U.S?

Sébastien Page

Valuations are high, but adjusted for return on equity and looking at a broader set of companies and stocks, they're not that high. On the number one argument that you hear from the bears, which is a valid argument, the increase in unemployment by 70 basis points in about 18 months. Blerina mentioned this. Unemployment is actually strong. You have to look at the level too. The level is 4.1%. The long-run average for unemployment in the U.S. is 5.7%, so you have a full-employment economy, which means a strong consumer, which Blerina mentioned. So you look at fairly expensive markets, but upward movements in the economy in the U.S., we end up in our Asset Allocation Committee moderately bullish. We have a small overweight to stocks.

If we see pullbacks that are more technical, the volatility that Arif talked about, we might actually add to stocks, but otherwise we're positioned for a market broadening. So we have overweights to value stocks, international small-caps, and EM.

The other part of our positioning, which is in line with Arif—and Arif is on our Asset Allocation Committee so we listen to him—is that there is potentially an upward risk to rates and inflation. So actually in that short duration, we have an overweight to cash and an overweight to credit, and we have an overweight to real asset equities, which give you a positive equity risk premium over time and a levered response to inflation shocks.

Ritu Vohora

And in fact, that's one of the audience questions we've had, is how do we position for potential reflation. It's through real assets.

Sébastien Page

That's one that I like. You can buy inflation-linked securities, TIPS, or linkers, but I like having a real asset equities position overweight as a hedge to an upward shock in inflation. Think energy companies, even REITs or metals and mining, and commodities-linked companies. Those companies give you a pop if you get an unexpected rise in inflation. And I'm not talking about 7%, 8%, 9%, I'm just talking about the fact that swap markets currently are pricing about 2.5% for U.S. inflation.

Earlier this year, for the first three months of the year, if you annualize the inflation rate, we were running at 4.5%. Is it possible that we get another three months with, say, a commodity shock where we run at 4.5%? Yes, so that's why the hedge.

Ritu Vohora

Bringing you into conversation Justin, given what Seb’s talked about, you’re head of International Equities.

We've seen the dominance of AI and a handful of stocks in the U.S., and it seems like U.S. exceptionalism is going to carry on. How do you see the setup for stocks and where do you see opportunities outside from the areas that Seb’s talked about?

Justin Thomson

Well, style-wise, I would go for value. Just on a relative value stance, valuation’s your friend.

You heard Steph talk about U.S. small- and mid-caps. I think that's the case internationally as well. Having underperformed for three years now, they're at a discount to where they've been historically. And internationally, there aren't some of the structural headwinds that U.S. small-cap faces.

I would say for inflation upside, a basket of commodities, and that's, you know, the fundamentals look good there as well. As we transition to our energy needs and our energy supply, the demand for certain commodities is going to be strong after a sustained period of under investment. So commodity prices could be strong.

I would say for the really contrarian, China—much unloved, much maligned, cyclically adjusted P/E of 10 times with potential stimulus coming, that's one for the contrarians.

Ritu Vohora

One for the brave. And a question now for you, Arif, that’s come through from the audience. In fixed income, we've seen higher bond yields, but a lot of volatility that we've talked about. Credit spreads are at historic lows, and there's a risk of higher defaults. Have investors missed the boat on credit?

Arif Husain

I don't think they missed the boat. I think there's still some parts of the credit market that look really attractive. I would characterize the majority of credit bias as yield bias as opposed to spread bias. And still, because of the backup in Treasury yields, you're still getting paid a decent amount of yield to own that credit. So I still think there's opportunities out there. For us, we would prefer shorter-dated, high quality.

One other idea, just thinking about what Seb and Justin have both talked about, one of the things we're doing in our portfolios at the moment is actually substituting some investment grade credit and adding TIPS instead. Decent correlation in most environments and potentially a better pay off risk/reward, and better convexity.

Ritu Vohora

So Seb, coming to you now, you've published a book on leadership. When I think about the opportunities we've talked about, there's a lot, but at the same time, investors can get quite nervous when there is a rapid pace of change and one of the themes in your book is about resilience. Can you give us three tips of how investors can navigate the uncertainty we're seeing?

Sébastien Page

Yes. Number one, differentiate between luck and skill. You learn this from a variety of sources, but in particular sports psychology, because in sports you don't always control the outcome. So a mentor once told me there are only two types of investors: those who are talented and those who are unlucky.

Well, being self-aware enough to know that sometimes you get it wrong or sometimes you make the right decision but you got the wrong outcome. So focusing on process is key.

Number two, identify your core beliefs. What do I mean by that? As an investor, which filters do you use to look at the world? And core beliefs are all over the place in our industry. Stocks for the long run is an example of a core belief. The trend is your friend is another one. And one that I like: The road to hell is paved with positive carry. This is a favorite of conservative fixed income investors. But just knowing your core beliefs will help you think about your process.

And third, meaning is really important in what we do, and I think with the trend towards index investing, we forgot the true meaning of active management. Every day we go to work, we want to make money for our clients. And there is no functioning global capital markets without active management. There's a tremendous amount of meaning in what we do in investment management.

So those are my three takeaways.

Ritu Vohora

That's very helpful. I'm sure very useful to the audience. And back to your opening comments, focus on the signal rather than the noise when you're navigating this change. So we’re almost at time, so I want to go with the speed round now. We've covered a lot of ground.

You're bullish and bearish, but if you had to pick one risk and one opportunity, what would they be? Arif?

Arif Husain

I would say the for the opportunity, I'm going to go opportunity first, I'd say the volatility and dispersion will create lots of active return. If you asked me to pick one asset class, TIPS.

For me, the biggest risk is, people talk about the fiscal deficits and it's almost an academic thing. People talk about bond yields being higher. Also almost an academic thing. What are the knock-on effects? What are the second-order effects of 10-year Treasuries getting 5%, maybe 6%? That is very poorly understood and very lack of imagination.

Ritu Vohora

OK, so carry to watch. Seb?

Sébastien Page

Well, the risk now just listening to Arif is, I'm now very worried about the U.S. 10-year yield. I think that's a risk to watch. In terms of opportunity, we, a lot of investors globally, have dry powder. We mentioned dry powder. There is a fair amount of money sitting in cash.

Now, if I give you a wonky way of saying this, I can say you want to add to risk assets on pullbacks. I think that's the opportunity for the next six months, all else equal. If I want a simpler way of saying this, be prepared to buy the dip.

Ritu Vohora

Well, as they say, volatility can be your friend. It's not necessarily risk, it can be opportunity. And Justin?

Justin Thomson

I'm just going to pick up on Seb’s aphorism about there being two types of investors. What I would say is that the more research and the harder work you do, the luckier you get, so there you go. But in terms of risk and opportunity, for me, they're bundled into the same thing. So we've had 15 years, which have been dominated by one country, the U.S. Within that, one sector: technology. And within technology, a handful of outstanding corporations that have dominated returns. That is both a risk in terms of index construction, in terms of how much money has those stocks have drawn other parts of the market. But it's also an opportunity because the opportunity is that markets can broaden from here, internationally, into small-cap stocks, into other parts of the market that have been starved of capital over time.

Ritu Vohora

Great, well, thank you for your comments, that's been great.

And if I could summarize, we still think U.S. growth is resilient, it'll carry on from here, but the fiscal policy, the fiscal deficits possibly means higher long-term yields, so we need to think about steepeners.

And of course, inflation, we could see it reaccelerating, so having some protection, but encouragingly, a broadening opportunity set.

So I think the key message is be active and be diversified, particularly with change. So thank you for that. And once again, thank you for joining, and we hope to see you again soon.

Glossary of terms

Artificial intelligence (AI) – AI technology enables computers and machines to simulate human intelligence and problem-solving capabilities.

Bullish - When describing market sentiment, a bullish market is one where prices are generally expected to rise.

Bearish - When describing market sentiment, a bearish market is one where prices are generally expected to fall.

Central banks – Central banks manage the monetary policy of a country.

Equity risk premium – The equity risk premium describes the excess return from investing in the stock market over the risk-free rate (i.e., a U.S. government bond).

Fed (the Federal Reserve) – The Fed is the central bank of the United States.

Fiscal policy – Fiscal policy refers to the use of government spending and tax policy to influence economic conditions.

Frontier markets – Frontier markets are a subset of emerging markets and may be smaller, riskier, or more illiquid.

Inflation swap – An inflation swap is a type of contract between two parties that enables one party to transfer inflation risk to the other. One party will pay fixed payments and the other will make payments based on the floating rate on an inflation index. A floating rate will change based on market conditions.

Gross domestic product (GDP) – GDP measures the market value of a country’s goods and services within a specific time period.

“Magnificent Seven” (Mag Seven) – The Mag Seven is Alphabet (Google), Amazon, Apple, Meta, Microsoft, NVIDIA, and Tesla. The specific securities identified and described are for informational purposes only and do not represent recommendations.

Mergers and acquisitions (M&A) – M&A are the different ways companies are combined.

Monetary policy – Monetary policy includes the tools used by central banks to promote employment, keep prices stable, and maintain economic growth.

Quantitative tightening (QT) – QT refers to monetary policy that decreases the amount of money supply (or liquidity) in the economy.

Treasury inflation-protected securities (TIPS) – TIPS are a type of Treasury security where the principal value is indexed to inflation.

Index definitions:

MSCI All Country World ex-U.S. Index – This index captures large- and mid-cap representation across 22 of 23 developed markets (DM) countries, excluding the U.S.

MSCI All Country ex-USA SMID Small and Mid Cap Index – This index captures mid- and small-cap representation across 22 of 23 DM countries, excluding the U.S., and 24 emerging markets countries.

Russell 1000® Growth Index – This index measures the performance of the large-cap growth segment of the U.S. equity universe.

Russell 1000® Value Index – This index measures the performance of the large-cap value segment of the U.S. equity universe.

S&P SmallCap 600® Index – This index seeks to measure the smallcap segment of the U.S. equity market.

Calculations and measurements:

Basis point (bps) – A basis point is equal to 0.01% or 0.0001. It is used to describe changes in percentages or interest rates.

Earnings per share (EPS) – EPS, a profitability measure, is the difference between dividends and net income, divided by the average number of shares of common stock outstanding.

Price-to-earnings ratio (P/E) – P/E is a measurement of a company's current share price relative to per-share earnings. It can be used for valuing a company.

Return on equity (ROE) – ROE is a financial measurement that divides net income by shareholder equity.

Investment risks

Active investing may have higher costs than passive investing and may underperform the broad market or passive peers with similar objectives. Each persons investing situation and circumstances differ. Investors should take all considerations into account before investing.

International investments can be riskier than U.S. investments due to the adverse effects of currency exchange rates, differences in market structure and liquidity, as well as specific country, regional, and economic developments. The risks of international investing are heightened for investments in emerging market and frontier market countries. Emerging and frontier market countries tend to have economic structures that are less diverse and mature, and political systems that are less stable, than those of developed market countries.

Commodities are subject to increased risks such as higher price volatility, and geopolitical and other risks. Commodity prices can be subject to extreme volatility and significant price swings.

Derivatives may be riskier or more volatile than other types of investments because they are generally more sensitive to changes in market or economic conditions; risks include currency risk, leverage risk, liquidity risk, index risk, pricing risk, and counterparty risk.

Treasury inflation protected securities (TIPS) In periods of no or low inflation, other types of bonds, such as U.S. Treasury bonds, may perform better than TIPS.

Investing in technology stocks entails specific risks, including the potential for wide variations in performance and usually wide price swings, up and down. Technology companies can be affected by, among other things, intense competition, government regulation, earnings disappointments, dependency on patent protection and rapid obsolescence of products and services due to technological innovations or changing consumer preferences. Financial services companies may be hurt when interest rates rise sharply and may be vulnerable to rapidly rising inflation. Health sciences firms are often dependent on government funding and regulation and are vulnerable to product liability lawsuits and competition from low-cost generic product.Because of the cyclical nature of natural resource companies, their stock prices and rates of earnings growth may follow an irregular path.

The value approach to investing carries the risk that the market will not recognize a security’s intrinsic value for a long time or that a stock judged to be undervalued may actually be appropriately priced. Growth stocks are subject to the volatility inherent in common stock investing, and their share price may fluctuate more than that of income-oriented stocks.

Small-cap stocks have generally been more volatile in price than large-cap stocks.

All investments involve risk, including possible loss of principal. Diversification cannot assure a profit or protect against loss in a declining market.

Fixed-income securities are subject to credit risk, liquidity risk, call risk, and interest-rate risk. As interest rates rise, bond prices generally fall. Investments in high-yield bonds involve greater risk of price volatility, illiquidity, and default than higher-rated debt securities. Investments in bank loans may at times become difficult to value and highly illiquid; they are subject to credit risk such as nonpayment of principal or interest, and risks of bankruptcy and insolvency. Because of the nature of private credit there may be heightened risks for investors, such as liquidity risk and credit risk to the underlying borrower and investments involve greater risk of price volatility, illiquidity, and default than higher-rated debt securities.

T. Rowe Price cautions that economic estimates and forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time. Actual outcomes could differ materially from those anticipated in estimates and forward-looking statements, and future results could differ materially from any historical performance. The information presented herein is shown for illustrative, informational purposes only. Any historical data used as a basis for this analysis are based on information gathered by T. Rowe Price and from third-party sources and have not been independently verified. Forward-looking statements speak only as of the date they are made, and T. Rowe Price assumes no duty to and does not undertake to update forward-looking statements.

Additional disclosures

T. Rowe Price multi-asset positioning: The asset classes across the equity and fixed income markets shown are represented in our multi-asset portfolios. Certain style and market capitalization asset classes are represented as pairwise decisions as part of our tactical asset allocation framework.

FactSet – Financial data and analytics provider FactSet. Copyright © 2024 FactSet. All Rights Reserved.

Haver Analytics – (Ministry of Health, Labour & Welfare, Statistical Office of the European Communities, Bureau of Labor Statistics, US Bureau of Labor Statistics, US Bureau of Economic Analysis, European Central Bank, Standard & Poor’s Bureau of Economic Analysis, Federal Reserve Board, Tax Policy Center and Citizens for Tax Justice, China National Bureau of Statistics, Bank of Korea)/Haver.

J.P. Morgan Chase – Information has been obtained from sources believed to be reliable but J.P. Morgan does not warrant its completeness or accuracy. The index is used with permission. The Index may not be copied, used, or distributed without J.P. Morgan’s prior written approval. Copyright © 2024, J.P. Morgan Chase & Co. All rights reserved.

MSCI – MSCI and its affiliates and third party sources and providers (collectively, “MSCI”) makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed, or produced by MSCI. Historical MSCI data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. None of the MSCI data is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such.

S&P – Copyright © 2024, S&P Global Market Intelligence (and its affiliates, as applicable). Reproduction of (S&P 500 Index) in any form is prohibited except with the prior written permission of S&P Global Market Intelligence (“S&P”). None of S&P, its affiliates or their suppliers guarantee the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions, regardless of the cause or for the results obtained from the use of such information. In no event shall S&P, its affiliates or any of their suppliers be liable for any damages, costs, expenses, legal fees, or losses (including lost income or lost profit and opportunity costs) in connection with any use of S&P information.

Important information

The views contained herein are those of the presenters as of November 21, 2024, and are subject to change without notice; these views may differ from those of other T. Rowe Price group companies and/or associates. This material is being furnished for general informational and/or marketing purposes only.

The material does not constitute or undertake to give advice of any nature, including fiduciary investment advice, nor is it intended to serve as the primary basis for an investment decision. Prospective investors are recommended to seek independent legal, financial and tax advice before making any investment decision. T. Rowe Price group of companies including T. Rowe Price Associates, Inc. and/or its affiliates receive revenue from T. Rowe Price investment products and services. Past performance is not a reliable indicator of future performance. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested.

The material does not constitute a distribution, an offer, an invitation, a personal or general recommendation or solicitation to sell or buy any securities in any jurisdiction or to conduct any particular investment activity. The material has not been reviewed by any regulatory authority in any jurisdiction.

Information and opinions presented have been obtained or derived from sources believed to be reliable and current; however, we cannot guarantee the sources' accuracy or completeness. There is no guarantee that any forecasts made will come to pass. The views contained herein are as of the date noted on the material and are subject to change without notice; these views may differ from those of other T. Rowe Price group companies and/or associates. Under no circumstances should the material, in whole or in part, be copied or redistributed without consent from T. Rowe Price.

The material is not intended for use by persons in jurisdictions that prohibit or restrict the distribution of the material and in certain countries the material is provided upon specific request.

The specific securities identified and described are for illustrative purposes only and do not represent all of the securities purchased, sold, or recommended by T. Rowe Price, and no assumptions should be made that investments in the securities identified and discussed were or will be profitable.

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