March 2022

Global Asset Allocation Viewpoints

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Welcome to our latest Asset Allocation Viewpoints - your monthly source for actionable insights on portfolio positioning from our Asset Allocation Committee and Multi-Asset team. 

Market Perspective

As of February 28, 2022

  • Global economic growth expected to moderate over the course of the year but remain above trend. Expectations for a moderation in inflation over the year may be stalled by inflationary pressures resulting from the conflict in Ukraine.
  • Despite rising geopolitical risk impacting growth, developed market central banks advancing toward tighter policies, with the US Federal Reserve expected to raise rates in March, European Central Bank curbing asset purchases, while Bank of Japan remains on hold. Emerging market central banks may need to raise interest rates to defend currencies against a stronger U.S. dollar and to contain inflation.
  • Short-term rates biased higher with central banks tightening, while long-term rates balance concerns of slowing growth, trajectory of inflation, and risk-off sentiment.
  • Key risks to global markets include conflict in Ukraine, accelerating inflation off already high levels, central bank missteps, emergence of COVID variants, and China growth trajectory.

Portfolio Positioning

As of February 28, 2022

  • While valuations are off recent peaks, we remain underweight equities given moderating growth and earnings outlook amid an active Fed and inflation concerns. Within fixed income, we remain overweight cash as longer rates remain biased higher.
  • Within equities, we trimmed our overweight to U.S. and Global ex-U.S. value stocks and into core equities, and took profits following a period of strong outperformance by value stocks.
  • Within our fixed income allocation, we continue to favor shorter duration and higher yielding sectors through overweights to short-term TIPS, floating rate loans, and high yield bonds supported by our still constructive outlook on fundamentals, while keeping a cautious eye on liquidity amid higher volatility.

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Market Themes

As of February 28, 2022

Chaos & Consequences

Russia’s invasion of Ukraine has shocked the world, and while the immediate concerns are the human toll on the Ukrainian people, the implications and aftermath will be felt far beyond the region. With the European continent being thrown into chaos not seen since World War II, it’s no surprise to see markets unsettled as they try to comprehend the impacts. In response to the aggression, the West has successfully collaborated by implementing several punishing sanctions targeting Russian banks, the Russian central bank, and Russian sovereign debt, which have sent the ruble on a downward spiral and that could devastate Russia’s economy. However, so far, the sanctions have stopped short of penalizing Russian energy companies, given Europe’s, and especially Germany’s, heavy reliance on Russian energy supply, and the potential negative inflationary impacts of an energy price shock on already high prices related to COVID. As this situation continues to unfold, the consequences could be far reaching, weighing on global growth and further accelerating inflation—especially given the area of conflict’s notable contributions in energy and food to the rest of the world.

Russian Ruble Relative to the U.S. Dollar

As of 28 February 2022


Past performance is not a reliable indicator of future performance.

Sources: Bloomberg Finance L.P., Financial data and analytics provider FactSet. Copyright 2022 FactSet. All Rights Reserved.

In and Out of Style

Equity markets’ rough start to the year facing high inflation and a more aggressive Fed has only gotten worse amid rising geopolitical issues in Ukraine, with the S&P 500 Index down roughly 8% year-to-date. Notable as the sell-off has deepened is that growth stocks have continued to underperform, where they are typically seen as more defensive in risk-off environments. Year-to-date, Russell 1000 Value stocks are down as well, but just 3%, while Russell 1000 Growth has fallen over 14% largely due to fears that already high inflation could worsen leading the Fed on a more aggressive tightening trajectory. Although more cyclically oriented, value stocks have held up relatively well, nearly all the positive contribution came from energy, which makes up 15% of the Russell 1000 Value index and is up over 30% year-to-date. With the conflict continuing to unfold in Ukraine, as investors and central banks evaluate the balance of rising inflation pressures and slowing growth with the possibility of stagflation, growth and value stocks may be out of style.

Year-to-Date Equity Sector Returns1

As of 28 February 2022


Past performance is not a reliable indicator of future performance.

1 References the Russell 1000 Index. Source: London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). Please see the last page for information about this FTSE Russell information

Sources: Bloomberg Finance L.P., Financial data and analytics provider FactSet. Copyright 2022 FactSet. All Rights Reserved.

Regional Backdrop

As of February 28, 2022

Regional Backdrop

Click each region below for more details

  • Strong corporate and consumer balance sheets
  • Pent-up demand for services and capex


  • Fed tightening expected at a rapid pace
  • Elevated stock and bond valuations
  • Supply chain issues limiting economic activity
  • Significantly elevated inflation
  • Fiscal stimulus has peaked

  • Fiscal stimulus increasing
  • Monetary policy remains accommodative
  • Equity valuations attractive relative to the US


  • Ukraine conflict likely to continue to exacerbate energy shortages
  • Industrial production dampened by supply chain challenges
  • Limited long-term catalysts for earnings growth
  • U.S. dollar strength likely to remain a headwind

  • Very attractive equity valuations
  • Improving corporate governance
  • Monetary policy remains attractive


  • Limited long-term catalysts for earnings growth
  • Global trade remains impacted by supply chain issues, geopolitical uncertainty, and COVID restrictions

  • Chinese authorities are easing regulatory and credit conditions
  • Equity valuations attractive relative to the US
  • COVID vaccination rate is rapidly increasing


  • Global trade remains impacted by supply chain issues, geopolitical uncertainty, and COVID restrictions
  • U.S. dollar strength likely to remain a headwind
  • Central bank accommodation is fading

Asset Allocation Positioning

As of February 28, 2022

These views are informed by a subjective assessment of the relative attractiveness of asset classes and subclasses over a 6- to 18-month horizon.

Positioning Key

Asset Classes

Valuations off recent peaks, but remain vulnerable to further rerating amid Fed tightening policy and potential for significant economic weakness in Europe. Earnings growth to remain positive but moderating, with potential headwinds from rising wage and input costs.

Global central bank policies shifting to a tighter stance and elevated inflation pressuring yields higher, supportive of short duration posture. Credit sector fundamentals remain favorable; recent risk-off environment has led to improved valuations.



Elevated valuations off recent peaks but remain challenged by Fed tightening, persistent inflation, geopolitical risks, and decelerating earnings growth. Growth orientation of U.S. market makes it more susceptible to rising rates.

Less challenging valuations and procyclical sector profile could be supportive if growth remains above trend, supported by policy easing in China. However, Ukraine conflict could weigh on growth outlook and supply chain improvement, particularly for Europe and emerging markets.

Cyclical orientation and reasonable valuations attractive, but Ukraine/Russia conflict poses a significant risk, due to the rising energy costs and impact of financial sanctions.

Attractive valuations, recent fiscal stimulus, stable global trade outlook, and improving corporate governance should provide tailwinds.

Valuations are very attractive; however risk-off sentiment could remain a headwind. Improving outlook in China and fading COVID waves are supportive although recent conflict in Ukraine could weigh on global trade and pressure inflation higher.

Style & Market Capitalization

Relative valuations for value stocks remain attractive, but the gap has narrowed considerably, and cyclical outlook has moderated. While growth stocks’ valuations have become less challenging, they will continue to be pressured by rising rates and slowing earnings.

Value stocks remain attractive, but are facing moderating cyclical tailwinds and higher geopolitical risks. Growth stocks’ valuations are lower but remain elevated.

Small-cap stocks offer attractive relative valuations and still strong earnings growth. However, elevated input costs, wage pressures, and heightened market volatility could challenge performance. Higher quality bias is warranted.

Environment for idiosyncratic opportunities remains favorable. However, U.S. dollar strength and geopolitical uncertainty could remain headwinds.


Supply/demand imbalances and rising geopolitical threats driving energy prices higher, although higher prices should encourage additional production in areas such as U.S. shale which can help offset current supply shortages. Real estate remains attractive in the context of economic recovery, but remain vulnerable to rising rates.


Shorter rates to move higher with path of Fed tightening, while longer rates balance impacts of still high growth, stickiness of inflation, and geopolitical conflict. Although corporate valuations have cheapened somewhat, they still look unattractive relative to history.

Rates likely to be biased higher on elevated inflation, however, Ukraine conflict has created growth concerns that may weigh on rates. USD supported by Fed’s tightening and safe haven trade.

Longer rates not expected to move significantly higher with Fed on tightening path and risk-off sentiment, but remain vulnerable should elevated inflation persist.

TIPS should offer a hedge if conflict in Ukraine keeps inflation elevated, but Fed in tightening mode should help constrain inflation.

Credit fundamentals remain solid and default risk remains low, however, continued spread volatility amid rising rate concerns and risk-off sentiment expected.

Shorter-duration profile and rate resets provide defense against rising short rates. Solid fundamentals and demand for yield should provide tailwinds. Cautious on new issuance quality amid increased demand.

Valuations are becoming more attractive as risk-off sentiment drives yields higher. EM still challenged by fiscal pressures, broader market volatility, slowing growth in China, coronavirus concerns, and tighter central bank policies.

As the conflict in Ukraine unfolds, yields continue to sell-off, allowing for more attractive entry points. Fed tightening and flight to safety keep upward pressure on the USD, which may force EM central banks to raise rates.

* For pairwise decisions in style & market capitalization, positioning within boxes represent positioning in the first mentioned asset class relative to the second asset class.

The asset classes across the equity and fixed income markets shown are represented in our Multi-Asset portfolios. Certain style & market capitalization asset classes are represented as pairwise decisions as part of our tactical asset allocation framework.

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Portfolio Implementation

As of February 28, 2022


Tactical Allocation Weights


Fixed Income

Tactical Allocation Weights


1 U.S. small-cap includes both small- and mid-cap allocations.

Source: T. Rowe Price. Unless otherwise stated, all market data are sourced from FactSet. Copyright 2022 FactSet. All Rights Reserved.

These are subject to change without further notice. Figures may not total due to rounding.

Neutral equity portfolio weights representative of a U.S.-biased portfolio with a 70% U.S. and 30% international allocation; includes allocation to real assets equities. Core fixed income allocation representative of U.S.-biased portfolio with 55% allocation to U.S. investment grade.

Source: 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.

“Bloomberg®” and Bloomberg Global Aggregate Index are service marks of Bloomberg Finance L.P. and its affiliates, including Bloomberg Index Services Limited (“BISL”), the administrator of the index (collectively, “Bloomberg”) and have been licensed for use for certain purposes by T. Rowe Price. Bloomberg is not affiliated with T. Rowe Price, and Bloomberg does not approve, endorse, review, or recommend Global Asset Allocation Viewpoints. Bloomberg does not guarantee the timeliness, accurateness, or completeness of any data or information relating to Global Asset Allocation Viewpoints.

Important Information

Any specific securities identified and described are for informational purposes only and do not represent recommendations.

This material is being furnished for general informational purposes only. The material does not constitute or undertake to give advice of any nature, including fiduciary investment advice, and 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 a 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.

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