June 2026
Global Asset Allocation Viewpoints
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.
Outlook
- Despite heightened geopolitical tensions that continue to fuel inflation pressures and weigh on growth, markets have remained remarkably resilient.
- The global economy continues to be supported by fiscal spending and ongoing investment, particularly in AI infrastructure, although growth is moderating and higher energy prices are creating additional headwinds.
- The monetary policy outlook has become increasingly complex as central banks balance persistent inflation pressures stemming from geopolitical conflict against signs of slowing economic activity and a soft labor market.
- Key risks include a further escalation of the conflict with Iran, a sustained rise in energy prices, greater reliance on a narrow set of growth drivers, and signs of deterioration in labor markets and private market liquidity.
Themes Driving Positioning
Higher-for-Ever?
The Iran war and resulting energy shock have pushed oil prices higher, adding to input costs, headline inflation, and inflation expectations. As a result, global interest rates have moved higher and central banks, including the Federal Reserve, have become more cautious about easing policy. More concerning, however, is that even if the current energy shock eventually fades, several structural forces suggest that the floor for interest rates could remain higher than it was over the previous decade. The global economy is requiring greater investment, with spending needs rising across AI infrastructure, defense, energy security, and grid resilience. At the same time, persistent fiscal deficits and elevated debt issuance are likely to keep pressure on government bond markets. Longer-term yields also appear to reflect a higher term premium, as investors demand greater compensation for inflation volatility, fiscal uncertainty, and geopolitical risk. Taken together, these forces suggest that interest rates may remain structurally higher than many investors expect, supporting our shorter-duration stance.
Leveling Up1
Data as of 31 May 2026 unless otherwise noted.
1”10-Year” represents the U.S. Treasury 10-Year Bond. “2010's Average” represents the average U.S. Treasury 10-Year month-end yield from 1 January 2010 through 31 December 2019. Source: Tullett Prebon Information via FactSet.
From Commodities to Code
The MSCI Emerging Markets Index has changed meaningfully, with technology rising from 24% of the benchmark at the end of 2024 to roughly 42% today, shifting the nature of emerging market (EM) equity exposure. Investors may still view EM as a play on regional economic growth, commodities, Chinese consumer demand, and global trade, but the asset class is increasingly tied to AI infrastructure, semiconductors and digital platforms. This does not mean EM has become less cyclical; rather, the source of cyclicality has shifted. EM may now be more exposed to semiconductor cycles, hyperscaler capex, AI sentiment, and broader investor appetite for growth stocks. For cross-asset investors, EM allocations may be taking on more technology and growth exposure than many realize, bringing underappreciated concentration and correlation risks. However, this shift also improves EM’s exposure to structural earnings growth, supporting our overweight to EM equities.
Tech-ing Over2
Data as of 31 May 2026 unless otherwise noted.
2Sources: FactSet and MSCI. Please see additional disclosures for more information.
Asset Class Positioning
These views are informed by a subjective assessment of the relative attractiveness of asset classes and subclasses over a 6- to 18-month horizon.
Asset Classes
- We remain neutral on equities reflecting a balanced view between decent fundamentals including a constructive earnings outlook and fiscal stimulus against elevated valuations and the geopolitical backdrop.
- Within equities, we have recently trimmed our global ex-US overweight to neutral, shifted to a modest overweight to growth, and took profits after small-cap outperformance while maintaining an overall overweight.
- We maintain a short duration profile through underweights to long-term U.S. Treasuries and Core bonds, along with an overweight to high yield.
- We also maintain a long position in short-term TIPS held as inflation mitigation.
- Though we still find cash yield levels reasonably attractive, we maintain a neutral position given cash yields are slightly below short-term bond yields.
Equities
Regional Views
Valuations are elevated but supported by exceptionally strong earnings growth. AI infrastructure buildout remains the key driver. Inflation and monetary policy remain key sources of risk.
Fiscal support should continue to support economic growth, but elevated energy prices are likely to pose a significant headwind and push short term rates higher.
Valuations remain attractive and the longer-term earnings growth outlook is healthy. However, budget concerns, inflation, and political instability are headwinds.
Fiscal stimulus and a broadening capex cycle support earnings and investor confidence. However, tighter monetary policy and elevated energy prices could temper momentum.
Energy and materials exposure should cushion the impact of higher commodity prices. However, elevated valuations and geopolitical uncertainty could limit upside.
Elevated commodity prices support earnings and exports, though restrictive policy, labor market softening, and slower domestic demand pose risks.
Global growth and stable currencies support equities, though if energy prices remain elevated, inflation and external pressures could increase.
Policy support and improving activity aid sentiment. Anti-involution efforts may support margins, though gains remain uneven. Housing weakness, soft demand, and sustained energy costs remain headwinds.
Style & Capitalization Views
Tailwinds increasing due to the shift to agentic AI and earnings momentum. Looming IPOs and Russell rebalance could boost momentum and volatility further.
Value supported by strength in energy and financials. However, Fed cuts unlikely and duration of Iran conflict could ultimately weigh on consumption.
Growth stocks’ valuations are relatively expensive, while fundamentals remain somewhat underwhelming, and rising energy costs will be a headwind.
Targeted fiscal spending and normalized interest rates driving earnings growth, particularly in industrials and financials. However, energy costs could be a headwind to growth.
Fundamentals are strong and accelerating among AI infrastructure beneficiaries. Valuations are stretched and sentiment may be overly optimistic.
Mid-cap companies generally have lower leverage with potential for higher quality earnings growth relative to small-caps, but could offer less upside in a cyclical upswing.
Small-cap momentum currently driven by riskier companies primarily due to excitement over broadening AI benefits. Meanwhile, cyclical strength could be impacted by higher energy costs.
Rising fiscal stimulus, particularly in Europe and Japan offer support. However, restricted energy supply could weigh on business and consumer sentiment.
Fiscal policies along with potential for a weaker dollar could provide tailwinds for cyclical areas with still very attractive valuations.
Offers mitigation from inflation shock pertaining to higher energy prices, and benefits from AI build-out demand. This area could also benefit from a weakening dollar.
Bonds
Regional & Sector Views
Rising inflation expectations and a Fed on pause keeps upward pressure on rates. Credit fundamentals still supportive, with spreads expensive relative to history.
Attractive yield levels, however higher vulnerabilities to energy price shocks prompting likely hawkish central bank responses.
Concerns around rising inflation expectations and fiscal deficits could keep upward pressure on long-end yields, with limited recession risk.
Inflation expectations remain elevated due to energy price shocks, though they may not be fully reflected in breakevens.
Tight spreads may limit further upside potential, but sector is supported by healthy fundamentals, favorable sector exposures and low default expectations.
Sector still offers attractive yield levels, however, software sector challenges and tight spreads could limit further upside.
Attractive yields and fundamentals are supportive, though geopolitical backdrop could create a bifurcated environment.
Compelling yields combined with expectations for a weaker U.S. dollar point to a favorable outlook. However, war in Iran could weigh on sentiment.
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ADDITIONAL DISCLOSURES
1 Real Assets allocation is representative as a percentage of the overall equity allocation.
Source: T. Rowe Price. Unless otherwise stated, all market data are sourced from FactSet. Copyright 2026 FactSet. All Rights Reserved.
These are subject to change without further notice. Figures may not total due to rounding.
Neutral equity portfolio weights are 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 is representative of a U.S.-biased portfolio with 55% allocation to U.S. investment grade.
S&P, MSCI and FactSet do not accept any liability for any errors or omissions in the indexes or data, and hereby expressly disclaim all warranties of originality, accuracy, completeness, timeliness, merchantability, and fitness for a particular purpose. No party may rely on any indexes or data contained in this communication. Visit www.troweprice.com/marketdata for additional legal notices & disclaimers.
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. 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 guarantee or a reliable indicator of future results.
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 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.
Risks: All investments are subject to risk, including possible loss of principal. Stock prices can fall because of weakness in the broad market, a particular industry, or specific holdings. Fixed-income securities are subject to credit risk, liquidity risk, call risk, and interest- rate risk. As interest rates rise, bond prices generally fall. Diversification does not assure a profit or protect against a loss in a declining market.
USA: T. Rowe Price Investment Services, Inc., and T. Rowe Price Associates, Inc.
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