March 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
- Ongoing geopolitical conflict and a more pronounced energy supply shock leading to higher inflation and rates could challenge risk assets, with valuations remaining somewhat elevated.
- While recent developments in the Middle East pose risks to inflation and growth, earnings momentum and economic growth still remain favorable, underpinned by accommodative fiscal policies across many regions.
- U.S. economic growth continues to show resilience driven by AI-driven capex spending, consumer spending and supportive fiscal policy. Although, weakness in the labor market warrants monitoring.
- Markets outside the U.S. continue to benefit from firmer domestic demand and policy, particularly in Europe and Japan.
- Key risks to global markets include escalating geopolitical tensions, a resurgence in inflation, reliance on AI-driven growth, further deterioration in labor markets, and a widening of liquidity concerns within private credit.
Themes Driving Positioning
Drumbeat
Equity markets have been rallying around expectations of stronger economic and earnings growth supported by fiscal spending this year. However, there has been an increasing drumbeat of negative headlines that may challenge that outlook. The latest being the US and Israeli attack on Iran which has led to a spike in energy prices, with no clear end in sight. This comes on the heels of rising concerns over AI, including the disruptive impacts on some business models and the magnitude and ultimate payoff of AI capex spending. There has also been a notable rise in headlines surrounding private credit market liquidity and exposures to some vulnerable sectors of the market. And while we don’t see any of these leading to a systemic risk today, the culmination, particularly as we move closer to mid-term elections and new leadership at the Fed, could lead to much louder drumbeats. For now, we maintain hedges to some of these risks, particularly inflation, and will look to market volatility for opportunities given our still constructive view.
The Hits Keep Coming1
Past performance is not a guarantee or a reliable indicator of future results
Data as of 28 February 2026 unless otherwise noted.
1 As of 9 March 2026. Sources: Bloomberg L.P. and S&P. Please see additional disclosures for more information.
Heavy Metal
Markets have seen a notable shift in performance toward “asset-heavy” sectors, with the likes of natural resources, energy, utilities and defense companies coming into vogue. Over recent weeks, investors have become increasingly concerned over the prospects for AI displacing certain business models, including software development and asset management companies. And while the concerns initially sent investors into more asset-heavy sectors presumed to be less vulnerable to AI disruption, many of these companies are actually seeing improving fundamentals. The expansion of AI and related infrastructure build is raising demand for energy, metals and materials, and global fiscal spending should also provide a boost. Notable changes to tax policy now allowing for accelerated expensing of capex could also drive increased demand within these sectors. So, while asset-lite companies, many of which are tech-related, have been the darlings for years, markets may be tuning into a new genre, with “heavy metals” making a comeback.
Heavy Hitters Topping the Charts2
Past performance is not a guarantee or a reliable indicator of future results
Data as of 28 February 2026 unless otherwise noted.
2 Source: Bloomberg L.P and S&P. The chart references S&P 500 GICS sectors.
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 fiscal support and the lagged impact of Fed rate cuts against expensive valuations and ongoing geopolitical tensions.
- We continued to increase our overweight to small-caps given reasonable valuations, coupled with a supportive environment reflected in constructive earnings outlook, falling interest rates, and tailwinds from deregulation.
- We moderated our short duration position, reflected in a lesser underweight to core bonds, a continued underweight to US long-term Treasuries, and an overweight to high yield.
- We also have an emphasis on inflation sensitivity reflected in an overweight position in short-term TIPS.
- Though we still find cash yield levels reasonably attractive, we have shifted to a neutral position given prospects for further Fed rate cuts later in the year.
Equities
Regional Views
Valuations remain stretched as hyperscaler capex pressures sentiment, yet AI-infrastructure demand supports earnings breadth. Higher oil prices add to inflation uncertainty.
Fiscal support and improving growth support cyclicals and financials, though higher energy prices and LNG supply risks are increasing uncertainty.
Valuations remain attractive and cyclical improvement is emerging. However, fiscal constraints, labor market softness, and energy price risks remain headwinds.
Equity strength has been supported by improving global growth and fiscal stimulus prospects, though higher energy costs and tighter policy may temper momentum.
Improving fundamentals and stronger energy prices support earnings, though elevated valuations, USMCA uncertainty, and inflation risks remain concerns.
Attractive valuations and stronger resource demand provide support, though higher energy prices and restrictive policy may limit upside.
Global growth momentum and stable currencies remain supportive, though higher oil prices and energy import exposure are significant near-term concerns.
Policy support and improving activity aid sentiment, though weak labor markets, property stress, and higher energy costs weigh on demand.
Style & Capitalization Views
Mega-cap tech facing a more challenging period due to increased competition and capital intensity. However, underlying fundamentals remain strong.
Economic growth outlook for 2026 supported by deregulation, fiscal policy, re-shoring and potential Fed cuts. However, valuation has moved ahead offundamentals.
Growth stocks’ valuations are relatively expensive, while fundamentals remain somewhat underwhelming, and rising energy costs could be a headwind.
Improving fiscal outlook, which now includes Japan, and normalized interest rate environment likely to drive further earnings growth, particularly in financials.
Strong fundamentals, particularly within AI infrastructure beneficiaries have justified valuations thus far. However, rising capex is coinciding with mounting competitive risks.
Mid-cap companies generally have lower leverage with potential for higher quality earnings growth relative to small-caps, but could offer less upside in the cyclical upswing.
Small-cap earnings improving sharply due to lower rates, deregulation, fiscal stimulus and broadening AI benefits. Upswing in manufacturing activity is also supportive.
Rising global fiscal stimulus, particularly in Europe and Japan offer support. Potential for further U.S. dollar weakness provides an additional tailwind.
Further economic acceleration supported by favorable monetary and fiscal policies along with a weaker dollar are beginning to provide tailwinds for cyclical areas with still very attractive valuations.
Potentially mitigates inflation risks, and benefits from AI build-out demand. Precious metals have been subject to momentum swings, but geopolitical uncertainty should help sustain the tailwind.
Bonds
Regional & Sector Views
Resilient growth amid sticky inflation places upward pressure on rates. Credit fundamentals still supportive, with spreads expensive relative to history.
Attractive alternative to U.S. yields with less steepening pressure on long end of the curve given stable growth and limited inflationary pressures.
Concerns around sticky inflation and fiscal deficits could keep upward pressure on long-end yields, with limited recession risk.
Inflation risk remains elevated due to staggered effects from tariffs, more stability to the economic growth backdrop, as well as ongoing geopolitical conflicts.
Tight spreads may limit further potential upside, but sector continues to offer a healthy yield, measured default expectations and a low duration profile.
Favorable valuations and attractive yields provide support, however, software sector challenges and prospects for further Fed rate cuts later in 2026 present potential headwinds.
Attractive yields and regional improvements supportive, though higher U.S. rates and geopolitical uncertainty could weigh on the asset class.
Compelling yields combined with expectations for a weaker U.S. dollar and lower rate volatility point to a favorable outlook.
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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.
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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.
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