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Investment Viewpoint

Global Asset Allocation Viewpoints

T. Rowe Price


As of April 30, 2019 

On board for slow but steady growth

  • We added back to small-cap stocks outside the U.S. and are now neutral as stabilizing domestic growth and reasonable valuations should be supportive.
  • We continued to add back to high yield bonds and are now neutral as reasonable yields and low default expectations support outlook. High yield bonds also offer a lower-beta alternative to equities.
  • We pared back emerging market bonds given the rise of country-specific risks creating the potential for near-term volatility.


As of April 30, 2019

Earnings: And the “beats” go on

After several months of downward earnings revisions and fears of an earnings recession in the U.S., companies are beating lowered expectations this earnings season. The better-than-expected earnings-per-share growth has been supported by slightly better revenue growth, stable margins, and share buybacks. Having seemingly avoided an earnings recession, U.S. equities have sharply outperformed the rest of the world again, with both large-cap and small-cap stocks recording their largest four-month gain since December 2010. With equity prices up more than 15% year-to-date and full-year earnings growth expectations at less than 5%, the market may have gotten a bit ahead of itself.

S&P 500 EPS Growth

As of April 30, 2019

Past performance is not a reliable indicator of future performance.
Sources: J.P. Morgan Chase & Co., Standard & Poor’s, Haver Analytics / Bureau of Economic Analysis. Financial data and analytics provider FactSet. Copyright 2019 FactSet. All Rights Reserved.

U.S.: Extending the cycle

U.S. gross domestic product (GDP) grew 3.2% year-over-year in the first quarter, extending the current expansion and tying the record from the 1990s, which had been the longest in history. Growth was surprisingly strong in a quarter that featured a government shutdown and severe winter weather. While the current cycle has been durable, it has also been relatively modest from a cumulative growth perspective. However, the recent strength suggests that the cycle may have more room to run with a strong U.S. consumer, stabilizing Chinese growth, and a potential trade deal in the works. The resilience in growth has not been isolated to the U.S., as recent Chinese data and the eurozone’s first-quarter GDP also surprised to the upside. Though long in tenure, we are reminded that cycles don’t die of old age alone.

U.S. Economic Expansions

Q4 (31 Dec) 1949 to Q1 (31 Mar) 2019

Past performance is not a reliable indicator of future performance.
Sources: J.P. Morgan Chase & Co., Standard & Poor’s, Haver Analytics / Bureau of Economic Analysis. Financial data and analytics provider FactSet. Copyright 2019 FactSet. All Rights Reserved.

EM: Idiosyncratic risks rising, again

While much of the focus in emerging markets has been on the growth trajectory in China, a growing number of hot spots have emerged among some of the large debt issuers once again. The economic and political crisis in Venezuela continues to deteriorate. Argentina remains in a deep economic recession, pressuring the peso to another record low and prompting the nation’s central bank to take further action to stabilize the currency. Turkey suffered its first recession in a decade amid political uncertainty and an unconventional central bank. While emerging markets bond yields remain attractive and broadly supported by positive fundamentals and low inflation, the recent rise in idiosyncratic risks bears watching.

Emerging Markets Currencies

April 30, 2018 through April 30, 2019

Past performance is not a reliable indicator of future performance.
Sources: J.P. Morgan Chase & Co., Standard & Poor’s, Haver Analytics / Bureau of Economic Analysis. Financial data and analytics provider FactSet. Copyright 2019 FactSet. All Rights Reserved.


As of April 30, 2019

United States

  • Dovish Fed, stable inflation
  • Healthy consumer spending, strong employment and improving wages
  • Lower rates driving a rebound in housing
  • Potential trade deal with China in the works
  • Greater share of secularly advantaged companies (e.g., cloud computing, internet retail) than rest of world
  • Moderating economic growth with fading fiscal stimulus
  • Late-cycle concerns: tight labor market, rising wages, and elevated margins
  • Political uncertainty and trade tensions
  • Muted near-term earnings expectations
  • Elevated corporate and government debt levels


  • Monetary policy remains very accommodative
  • Indirect beneficiary of China stimulus
  • Political headwinds have eased
  • Economic growth showing signs of stabilization
  • Eurozone economic growth is muted, with limited scope for ECB to respond
  • Export weakness, vulnerable to trade and China growth
  • Banking sector remains challenged
  • Unity remains challenged amid rising populism and protectionism

Developed Asia/Pacific

  • BOJ committed to aggressively dovish policy, RBA on hold in face of rising inflation
  • China stimulus could support regional trade
  • Japanese fiscal stimulus implemented in April
  • Broadly attractive valuations, particularly in Japan
  • Improving corporate governance trends in Japan
  • Highly exposed to slowing global economic growth and trade tensions
  • Japanese economic and earnings growth continue to be much weaker than hoped
  • Australia facing slowing economy with weakness in housing
  • Australian earnings facing increased margin pressure

Emerging Markets

  • Muted (but rising) inflation, more dovish Fed gives central banks flexibility to ease
  • Chinese stimulus appears to be taking hold
  • U.S.-China trade deal appears likely
  • Global trade indicators appear to be stabilizing
  • Equity valuations attractive relative to developed markets
  • With growing importance of tech sector, less tied to commodity cycle
  • Instability in several key markets (Turkey, Argentina, and Brazil) could persist
  • Long-term China growth trajectory remains a headwind
  • China stimulus more measured and domestically focused
  • Highly linked to global trade
  • Currencies facing renewed pressure


As of April 30, 2019


As of April 30, 2019

Source: T. Rowe Price
Neutral equity portfolio weights broadly representative of MSCI All Country World Index regional weights; includes allocation to real assets equities. Core global fixed Income allocation broadly representative of Bloomberg Barclays Global Aggregate Index regional weights.
Information presented herein is hypothetical in nature and is shown for illustrative, informational purposes only. It is not intended to be investment advice or a recommendation to take any particular investment action. This material is not intended to forecast or predict future events and does not guarantee future results. These are subject to change without further notice.
Please see “Additional Information” on final page for information about this MSCI information.
Bloomberg Index Services Ltd. Copyright ©2019, Bloomberg Index Services Ltd. Used with permission.

Certain numbers in this report may not equal stated totals due to rounding.
Source: Unless otherwise stated, all market data are sourced from Factset. Financial data and analytics provider FactSet. Copyright 2019 FactSet. All Rights Reserved.
Source for MSCI data: 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.

The “S&P 500 Index” is a product of S&P Dow Jones Indices LLC, a division of S&P Global, or its affiliates (“SPDJI”), and has been licensed for use by T. Rowe Price. Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC, a division of S&P Global (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). T. Rowe Price’s product(s) are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, or their respective affiliates and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500 Index.

J.P. Morgan. Information has been obtained from sources believed to be reliable but J.P. Morgan does not warrant its completeness or accuracy. The index is used with permission. The Index may not be copied, used, or distributed without J.P. Morgan’s prior written approval. Copyright 2019, J.P. Morgan Chase & Co. All rights reserved.

Key Risks – The following risks are materially relevant to the information highlighted in this material:
Even if the asset allocation is exposed to different asset classes in order to diversify the risks, a part of these assets is exposed to specific key risks.
Equity risk – in general, equities involve higher risks than bonds or money market instruments.
Credit risk – a bond or money market security could lose value if the issuer’s financial health deteriorates.
Currency risk – changes in currency exchange rates could reduce investment gains or increase investment losses.
Default risk – the issuers of certain bonds could become unable to make payments on their bonds.
Emerging markets risk – emerging markets are less established than developed markets and therefore involve higher risks.
Foreign investing risk – Investing in foreign countries other than the country of domicile can be riskier due to the adverse effects of currency exchange rates, differences in market structure and liquidity, as well as specific country, regional, and economic developments.
Interest rate risk – when interest rates rise, bond values generally fall. This risk is generally greater the longer the maturity of a bond investment and the higher its credit quality.
Real estate investments risk – real estate and related investments can be hurt by any factor that makes an area or individual property less valuable.
Small and mid-cap risk – stocks of small and mid-size companies can be more volatile than stocks of larger companies.
Style risk – different investment styles typically go in and out of favour depending on market conditions and investor sentiment.

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 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.

The material is not intended for use by persons in jurisdictions which prohibit or restrict the distribution of the material and in certain countries the material is provided upon specific request.

It is not intended for distribution to retail investors in any jurisdiction.

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