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2024 Global Market Outlook Midyear Update

How central bank policy could impact your portfolio


At midyear, expectations for rate cuts have been pushed out further, with far fewer anticipated, and markets have repriced accordingly. We anticipate growth in the global economy-however, while the U.S. economy remains strong, leading indicators suggest that the narrative of U.S. exceptionalism may fade. We see continued market broadening, with select equity and fixed income opportunities. Most importantly, the ongoing transition from the low rate post-global financial crisis environment to one characterized by higher interest rates may provide favorable conditions for active managers to outperform. 

Higher for longer has become the consensus

Most developed market central banks are walking a tightrope amid reaccelerating inflation. The Federal Reserve is likely to make fewer cuts, while we believe the European Central Bank will cut between one and three times. We expect Japan to gradually tighten its monetary policy.

Key takeaway:

The Fed is more likely to surprise with fewer cuts than with more.

Opportunities broaden beyond the Magnificent Seven

We believe artificial intelligence will create long-term winners, but stock selection is key as performance of the mega-cap tech stocks begins to fragment. We anticipate a continued broadening of opportunities to include more companies and sectors that may have lagged in recent years. We believe that value—and possibly small-cap—stocks may begin to challenge the dominance of large-cap growth stocks.

Key takeaway:

Now may be the time to diversify into areas that have valuation support and robust fundamentals, such as value stocks. 

Estimated earnings per share of value stocks set to outstrip growth stocks later this year.

As of May 13, 2024.Source:
FTSE Russell (see Additional Disclosures).
Actual outcomes may differ materially from estimates. Each time period shows the estimated year‑over‑year change in quarterly earnings for growth and value stocks for each quarter this year.

(Fig. 5) Estimated EPS of value of stocks set to ouship growth stocks later this year

Rising capital expenditure should benefit value sectors

In contrast to the U.S. market’s heavy exposure to growth stocks, the international market is more exposed to value-oriented sectors, including financials, materials, industrials, and energy. Supply chain diversification, infrastructure rebuild, defense spending, and the likelihood of higher energy prices should favor traditional value sectors as capital spending accelerates.

Key takeaway:

We continue to favor Japan and see select opportunities in emerging markets, such as South Korea and Vietnam.

Uncertain environment favors short duration bonds

Short-term bonds are highly valued during uncertain periods—such as the present—because they are less exposed to interest rate changes than longer-maturity bonds. They also provide the potential for higher returns than cash while being almost as liquid, which can be useful during periods of economic uncertainty.

Key takeaway:

Investors moving out of cash may look to short duration bonds. While credit spreads are tight, all-in yields look attractive, with the potential for price appreciation if yields move lower. 

Bonds have tended to outperform cash during rate pause periods

As of April 30, 2024.
Past performance is not a reliable indicator of future performance. For illustrative purposes only. This is not representative of actual investments and does not reflect any fees and expenses associated with investing. Indexes cannot be invested in directly.
Cash is represented by the Bloomberg U.S. Treasury Bills 1–3 Month Index, and bonds are represented by the Bloomberg U.S. Aggregate Bond Index. Historical average performance in the 6 months leading up to the last Federal Reserve rate hike, the rate pause period (between the last rate hike and first cut), and the 6 months after the first cut. Dates used for the last rate hike of a cycle are: 02/01/1995, 03/25/1997, 05/16/2000, 06/29/2006, 12/19/2018. Dates used for the first rate cut are: 07/06/1995, 09/29/1998, 01/03/2001, 09/18/2007, 08/01/2019.
Source: Bloomberg Finance L.P. Data analysis by T. Rowe Price.

Energy stocks and commodities could help hedge against inflation

Stocks have typically dipped sharply during recessions and also weakened when inflation was at higher levels. However, energy sector stocks have historically performed quite well during periods of very high inflation. This suggests that one way to hedge against inflation risk would be to tilt portfolios toward stocks in the energy sector and other commodity-oriented equities. 

Key takeaway:

Sticky inflation could inflect higher as global growth broadens. Commodity-oriented equities may offer an effective way to navigate inflation risk.  

Tactical allocation views

Get the T. Rowe Price Multi-Asset Division’s expert views on the relative attractiveness of asset classes and subclasses over the next six to 18 months.


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Views are the opinions of the Global Market Outlook Midyear Update authors as of June 7.

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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, geopolitical and other risks. Commodity prices can be subject to extreme volatility and significant price swings.

TIPS In periods of no or low inflation, other types of bonds, such as US Treasury Bonds, may perform better than Treasury Inflation Protected Securities (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.

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.

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

Because of the cyclical nature of natural resource companies, their stock prices and rates of earnings growth may follow an irregular path.Fixed-income securities are subject to credit risk, liquidity risk, call risk, and interest-rate risk. As interest rates rise, bond prices generally fall. Short duration bonds have more risk than cash/cash equivalents such as money markets. Equities have higher risk and are subject to possible loss if principal.

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.

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 Disclosure

Bloomberg Index Services Limited. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). BARCLAYS® is a trademark and service mark of Barclays Bank Plc (collectively with its affiliates, “Barclays”), used under license. Bloomberg or Bloomberg’s licensors, including Barclays, own all proprietary rights in the Bloomberg Barclays Indices. Neither Bloomberg nor Barclays approves or endorses this material or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith.

London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). © LSE Group 2024.All rights in the FTSE Russell indexes or data vest in the relevant LSE Group company which owns the index or the data. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indexes or data and no party may rely on any indexes or data contained in this communication. No further distribution of data from the LSE Group is permitted without the relevant LSE Group company’s express written consent. The LSE Group does not promote, sponsor or endorse the content of this communication.

Important Information

Diversification cannot assure a profit or protect against loss in a declining market.

This material is provided for informational purposes only and is not intended to be investment advice or a recommendation to take any particular investment action. The views contained herein are those of the authors as of June 2024 and are subject to change without notice; these views may differ from those of other T. Rowe Price associates. This information is not intended to reflect a current or past recommendation concerning investments, investment strategies, or account types, advice of any kind, or a solicitation of an offer to buy or sell any securities or investment services. The opinions and commentary provided do not take into account the investment objectives or financial situation of any particular investor or class of investor. Please consider your own circumstances before making an investment decision. Information contained herein is based upon sources we consider to be reliable; we do not, however, guarantee its accuracy.

Information contained herein is based upon sources we consider to be reliable; we do not, however, guarantee its accuracy. 

Past performance is not a reliable indicator of future performance. All investments are subject to market risk, including the possible loss of principal. All charts and tables are shown for illustrative purposes only.

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