- Secular risk is disrupting a variety of industries and changing the growth versus value dynamic across multiple asset classes.
- Growth has outperformed value in equities over the past decade, and indications are that this trend may continue due to secular challenges facing value-oriented equities.
- In fixed income we are late in the U.S. credit cycle, which makes broad global diversification prudent in the near term.
- Diversified strategic asset allocations built to survive market ups and downs will be important with the possibility of a U.S. recession increasing after next year.
The number of attractive industries and companies is shrinking. By our estimate, about 31% of the companies in the S&P 500 Index are being challenged by outside disruptors. If growth continues to outperform, value sectors could face headwinds over the long term. Security selection will be critical in this environment. There could be opportunities in emerging markets fixed income for active managers who can uncover them.
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Bond funds are subject to risk that if interest rates rise significantly from current levels, bond fund total returns will decline and may even turn negative in the short term.
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.
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 April 2019 and are subject to change without notice; these views may differ from those of other T. Rowe Price associates.
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. Diversification cannot assure a profit or protect against loss in a declining market. All charts and tables are shown for illustrative purposes only.
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