Capital Market Assumptions
The T. Rowe Price 5-Year Capital Market Assumptions were calculated based on data as of December 31, 2019. While they do include forecasts for bull and bear market scenarios, they do not reflect the impact of Covid-19 on the global capital markets and world economy starting in January 2020.
CMAs are best understood as forecasts for the central tendency of forward returns. They do not seek to predict actual or realized returns, as there is bound to be material variation around this central tendency for any given historical or future period. For this reason, T. Rowe Price's approach to portfolio construction relies on the use of multiple methods of optimization and robustness checks.
Current tactical positioning in our Multi-Asset strategies is available in our Global Asset Allocation Viewpoints monthly publication.
Key Risks and Important Information
Forecasts are based on subjective estimates about market environments that may never occur. Some of the factors that could impact these forecasts include, but are not limited to:
Political and economic conditions
Performance of financial markets
Interest rate levels
Changes to laws or regulations
Investments in equities are subject to the volatility inherent in equity investing, and their value may fluctuate more than investing in income-oriented securities. Certain asset classes are subject to sector concentration risk and are more susceptible to developments affecting those sectors than broader classes. Investment in small companies involves greater risk than is customarily associated with larger companies, since small companies often have limited product lines, markets, or financial resources. Transactions in securities denominated in foreign currencies are subject to fluctuations in exchange rates, which may affect the value of an investment. Debt securities could suffer an adverse change in financial condition due to a ratings downgrade or default, which may affect the value of an investment. Investments in high yield involve a higher element of risk. Investments in less developed regions can be more volatile than other, more developed markets due to changes in market, political, and economic conditions. Investments are less liquid than those that trade on more established markets.
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T. Rowe Price Capital Market Assumptions: The information presented herein is shown for illustrative, informational purposes only. Forecasts are based on subjective estimates about market environments that may never occur. This material does not reflect the actual returns of any portfolio/strategy and dis not indicative of future results. The historical returns used as a basis for this analysis are based on information gathered by T. Rowe Price and from third-party sources and have not been independently verified. The asset classes referenced in our capital market assumptions are represented by broad-based indices, which have been selected because they are well known and are easily recognizable by investors. Indices have limitations due to materially different characteristics from an actual investment portfolio in terms of security holdings, sector weightings, volatility, and asset allocation. Therefore, returns and volatility of a portfolio may differ from those of the index. Management fees, transaction costs, taxes, and potential expenses are not considered and would reduce returns. Expected returns for each asset class can be conditional on economic scenarios; in the event a particular scenario comes to pass, actual returns could be significantly higher or lower than forecast.
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, 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. This material has been prepared for informational purposes only. The views and opinions stated in this commentary are those of the portfolio managers listed as of the date indicated. These views and opinions are subject to change based on market or other conditions and may differ from those of other T. Rowe Price associates. Actual market and investment results may differ materially from expectations. 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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