T. Rowe Price - Home
Choose your site Enterprise Corporate Financial Intermediary Institutional Investors/Consultants
Your location and language
English
Search
Choose your site Enterprise Corporate Financial Intermediary Institutional Investors/Consultants
Your location and language
English
Your location and language
English
By  Yoram Lustig, CFA, PRM™

Monthly Asset Allocation Update – January 2026

Our latest market perspectives and portfolio positioning insights

January 2026

View Transcript
Transcript

Hello, I’m Yoram Lustig and I am pleased to share our January 2026 monthly asset allocation update. I’ll highlight the key investment themes shaping our outlook and how we’re positioning portfolios.

First, the AI Revolution.
There’s debate about whether AI is in a bubble, but the real question is what could cause it to pop. Triggers might include disappointing earnings from major players or a tightening in financial conditions, but for now, with the Fed likely to keep cutting rates, the rally could persist. We’re modestly overweight equities and risk assets like high yield, but remain cautious due to stretched valuations and ongoing risks around labour markets, inflation, and geopolitics.

Second, higher government bond yields.
US affordability pressures and potential pre-election fiscal easing may keep inflation sticky. While Fed rate cuts could support growth, they may also push long-term Treasury yields higher. With high debt and deficits, we’re underweight government bonds, holding shorter durations, and relying more on defensive assets like active strategies, the US dollar, and gold.

Third, market broadening.
We’re overweight equities outside the US and US small-caps. International markets are more attractively valued, and the US could be more affected by tariffs in 2026. Europe and Japan may benefit from increased spending and supportive policies, while US small-caps look attractive with lower valuations and less geopolitical risk, especially in a rate-cutting environment.

Thank you for joining us, and we’ll see you again next month.
 

Global asset allocation – as of 31 December 2025

* For pairwise decisions in style, market capitalisation (size) and currencies, positioning within boxes represents positioning in the first‑mentioned asset class relative to the second asset class.
T. Rowe Price Europe and UK Regional Investment Committees inform the global asset allocation views. This material is not intended to be investment advice or a recommendation to take any particular investment action.
As of 31 December 2025.

Transcript

Hello, I’m Yoram Lustig and I am pleased to share our January 2026 monthly asset allocation update. I’ll highlight the key investment themes shaping our outlook and how we’re positioning portfolios.

First, the AI Revolution.
There’s debate about whether AI is in a bubble, but the real question is what could cause it to pop. Triggers might include disappointing earnings from major players or a tightening in financial conditions, but for now, with the Fed likely to keep cutting rates, the rally could persist. We’re modestly overweight equities and risk assets like high yield, but remain cautious due to stretched valuations and ongoing risks around labour markets, inflation, and geopolitics.

Second, higher government bond yields.
US affordability pressures and potential pre-election fiscal easing may keep inflation sticky. While Fed rate cuts could support growth, they may also push long-term Treasury yields higher. With high debt and deficits, we’re underweight government bonds, holding shorter durations, and relying more on defensive assets like active strategies, the US dollar, and gold.

Third, market broadening.
We’re overweight equities outside the US and US small-caps. International markets are more attractively valued, and the US could be more affected by tariffs in 2026. Europe and Japan may benefit from increased spending and supportive policies, while US small-caps look attractive with lower valuations and less geopolitical risk, especially in a rate-cutting environment.

Thank you for joining us, and we’ll see you again next month.

Yoram Lustig, CFA, PRM™ Head, Global Investment Solutions, EMEA
Mar 2025 Investment Insight

Global Asset Allocation: The View From Europe

Discover the latest global market themes
By  Yoram Lustig, CFA, PRM™
Feb 2025 Investment Insight

Global Asset Allocation: The View From Europe

Discover the latest global market themes
By  Yoram Lustig, CFA, PRM™

 

IMPORTANT INFORMATION

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 to retail investors in any jurisdiction.

202601-5103366