Skip to content

October 2021 / MARKET OUTLOOK

Global Asset Allocation: October Insights

Discover the latest global market themes

1. Market Perspective

  • Global economic growth outlook remains favourable, albeit past peak levels, balanced by further progress toward global emergence from coronavirus shutdowns versus fading policy support and supply chain disruptions.
  • Global monetary policy is expected to continue its path toward tightening, but central banks are on different trajectories, with some—particularly in emerging markets—having already acted in response to higher inflation while others continue to keep policy on hold awaiting stronger evidence of sustained growth.
  • Long‑term interest rates could trend higher amid the outlook for above‑trend growth and inflation, but upside may be limited as growth and imbalances driving inflation moderate.
  • Key risks to global markets include elevated inflation, central bank missteps, slowing China growth, supply chain disruption, increased regulatory pressures, higher taxes and increasing geopolitical concerns.

2. Portfolio Positioning

As of 30 September 2021

  • We remain modestly underweight equities relative to bonds and cash as valuations look less compelling amid moderating growth and stimulus. Higher rates, rising input costs related to supply chain bottlenecks, rising energy prices and potential tax increases could pose challenges to the near‑term earnings outlook.
  • Within equities, we continue to favour value‑oriented equities globally, US small‑caps and emerging market stocks as we expect cyclically exposed companies to benefit from a supportive global growth profile, coupled with unleashed pent‑up demand and inventory rebuilding as supply bottlenecks and coronavirus concerns abate.
  • Within fixed income, we continue to favour shorter‑duration and higher‑yielding sectors through overweights to high yield bonds and emerging market debt given our constructive credit outlook.

3. Market Themes

More Predictably Unpredictable

After a crackdown on internet technology and educational companies last month, risks continue to emerge out of China, including the potential fallout in its massive real estate sector following missed debt payments by Evergrande—one of the nation’s largest property developers. The focused suite of regulatory actions out of Beijing are driven by efforts to balance wealth inequality and have had far‑sweeping impacts on sectors such as technology, education, real estate and health care. At the same time, authorities have started to more aggressively pursue its five‑year plan to reduce carbon emissions by limiting coal supply, resulting in power outages and shuttering factory activity leading to supply shortages. The degree of recent actions taken by the Chinese government combined with declining growth estimates is causing investors angst. Although unlikely to allow economic growth to fall significantly, China’s actions may force foreign investors and trading partners to reassess the risks of investing in a place that has become more predictably unpredictable.

Actions Speak Louder Than Words

Inflation is proving to be a bit more persistent and higher than many expected, putting pressure on some central banks around the globe to act. Several emerging market central banks, such as Brazil and Mexico, began raising rates over the summer to fend off higher prices, and now, some developed market central banks are similarly looking to act. The Bank of England (BoE) has signalled that higher rates are coming soon as inflation is expected to get close to 4%—double its target. And while the US Federal Reserve is planning on tapering asset purchases, it remains committed to its current rate policy, reiterating that elevated inflation levels will be ‘transitory’. The European Central Bank (ECB) similarly warned of not overreacting to current inflation levels, keeping current policy in place. Although most central banks believe inflation will prove temporary, prices could remain elevated for an extended period—perhaps too long for them to hold onto their words and not take action.


For a region-by-region overview, see the full report (PDF).




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 which prohibit or restrict the distribution of the material and in certain countries the material is provided upon specific request.  

It is not intended for distribution retail investors in any jurisdiction.

Previous Article

October 2021 / FIXED INCOME

Exploiting the life cycle of an EM opportunity
Next Article


Rising Inflation Risk and How to Address It


Looming Lower Returns Demand Creative Multi-Asset Response

Looming Lower Returns Demand Creative Multi-Asset Response

Looming Lower Returns Demand Creative Multi-Asset...

Active management and a broad toolkit may be necessary

By Yoram Lustig & Michael Walsh

By Yoram Lustig & Michael Walsh

September 2021 / MARKET OUTLOOK

Global Asset Allocation: September podcast

Global Asset Allocation: September podcast

Global Asset Allocation: September podcast

Discover the latest global market themes

By Yoram Lustig & Michael Walsh

By Yoram Lustig & Michael Walsh