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Investment Insights

Global Asset Allocation Viewpoints

T. Rowe Price

Portfolio Positioning

As of 29 February 2020

Dislocation Creates Opportunities, Lower Rates Supportive

  • Growing concerns over the spread of the coronavirus have triggered volatility, resulting in a rapid correction in equities from February’s peak levels, driving U.S. Treasury yields to record low levels.
  • While uncertainty may persist near-term, we took the opportunity to add to equities as the swift repricing has offered more attractive relative valuations for stocks as bonds have become increasingly expensive.
  • Within U.S. equities, we trimmed exposure to growth stocks and added to value as cyclically oriented companies have sold off more, further expanding relative valuations in favor of value stocks which could see a more pronounced rebound.
  • Within fixed income, we reduced our exposure to emerging market bonds as they may be vulnerable to further downside risk given current valuation levels and a growing list of idiosyncratic concerns.
  • For U.S.-based fixed income investors, we added to U.S. dollar-hedged international bonds as they offer diversification among higher quality bonds with a comparable hedged yield to U.S. investment grade.

Market Themes

COVID-19: Shock to Supply and Demand

While last year’s heightened trade tensions weighed on global supply chains, the worldwide spread of the coronavirus has nearly brought activity to a standstill, creating the potential for a global economic shock. The outbreak has not only disrupted supply chains and reduced access to goods, fears of the infection spreading, and associated work stoppages are weighing on consumer spending. This comes at a vulnerable time as growth in many developed markets had just started to recover from last year’s lull, particularly across Europe, which is now at risk of deteriorating. Companies closely tied to the consumer—including retail, technology, and consumer goods—are already acknowledging the impacts to sales and earnings expectations. Economies reliant on tourism, particularly in Asia, have also taken a hit as consumers continue to pull back on travel plans as the virus spreads to new regions. Global economic growth will certainly take a hit; however, the full impact is likely to be felt over the course of several months.

Global Equity Market vs. Volatility
As of 5 March 2020

Past performance is not a reliable indicator of future performance.
VIX Index is represented by the CBOE Market Volatility Index. Sources: MSCI, Standard & Poor’s, Bloomberg Finance L.P., U.S. Federal Reserve, European Central Bank, and Bank of Japan.
Please see “Additional Disclosures” on final page for information.

Whatever It Takes 2.0?

Expectations are heightened for central banks, including the U.S. Federal Reserve to take further policy action to avoid an economic collapse due to the coronavirus outbreak. G-7 central banks pledged to collaborate and take concerted action to provide ample liquidity to ensure stability in the global economy, despite limited room for monetary policy. So far, the Fed has delivered a 50-basis-point inter-meeting cut, and other countries, including Canada, Australia and Malaysia, have also cut rates. Apart from the Fed, many central banks within developed markets most impacted by the virus are starting from a position of weakness, with already low or negative policy rates and extended balance sheets. With limited tools in their arsenals and questionable ability to stave off the virus’s economic impacts with monetary policy alone, “whatever it takes” may need some fiscal help this time around.

Developed Market Policy Rates
As of 5 March 2020

Past performance is not a reliable indicator of future performance.
VIX Index is represented by the CBOE Market Volatility Index. Sources: MSCI, Standard & Poor’s, Bloomberg Finance L.P., U.S. Federal Reserve, European Central Bank, and Bank of Japan.
Please see “Additional Disclosures” on final page for information.

Biden’ Time!

Equity markets rallied in response to the outcome of Super Tuesday primary elections after former Vice President Joe Biden, a perceived moderate, secured the lead among Democratic hopefuls to challenge President Donald Trump. Moderate democrats united in the days leading into Super Tuesday with other key candidates dropping out and pledging support for Biden. For now, Biden’s strong performance has quelled investors’ fears that had gained traction in February as Senator Bernie Sanders, who is viewed as a less market-friendly candidate, rose to the lead. Notably, managed health care companies, that would be most at risk of Sanders’ Medicare for All, rallied on the news. With former Mayor Mike Bloomberg also dropping out, Biden looks more likely to take the nomination come July. Looking forward, markets will likely refocus on the potential threats to Trump’s economy resulting from the spreading coronavirus and the real chance it could derail his reelection prospects.

S&P 500 Managed Health Care Index
As of 5 March 2020

Past performance is not a reliable indicator of future performance.
VIX Index is represented by the CBOE Market Volatility Index. Sources: MSCI, Standard & Poor’s, Bloomberg Finance L.P., U.S. Federal Reserve, European Central Bank, and Bank of Japan.
Please see “Additional Disclosures” on final page for information.

Regional Backdrop

As of 29 February 2020

United States

  • Fed supportive
  • Healthy consumer balance sheets
  • Lower interest rates driving a modest rebound in housing
  • Pause in trade war escalation
  • Greater share of secularly advantaged companies (e.g., cloud computing, internet retail) than rest of the world
  • Virus concerns rising
  • Political uncertainty elevated
  • Modest economic growth, with virus impacts looming
  • Weak capex spending and corporate confidence
  • Late-cycle concerns: tight labor market, rising wages, and corporate margins under pressure
  • Elevated corporate and government debt levels


  • Monetary policy remains very accommodative
  • Services sector of the economy has been resilient
  • Dividend yields remain strong
  • Political uncertainty waning
  • Weak economic growth, with virus impacts looming
  • Limited scope for European Central Bank (ECB) to stimulate further
  • Export weakness, vulnerable to trade and China growth
  • Banking sector remains weak

Developed Asia/Pacific

  • Potential beneficiary of China stimulus
  • Improving corporate governance trends in Japan
  • Fiscal stimulus enacted in Japan
  • Australian housing market stabilizing
  • Weak economic growth, with virus impacts looming
  • Impacts of the demand shock in China likely to be significant
  • Highly sensitive to global industrial production and trade trends
  • Earnings growth already weak

Emerging Markets

  • Virus outbreak in China appears to be peaking
  • Policy response from China has been significant
  • Dovish Fed has given central banks flexibility to ease
  • Easing trade tensions
  • Equity valuations attractive relative to developed markets
  • Modest economic growth, with virus impacts looming
  • Highly sensitive to global industrial production and trade trends
  • Commodity prices under pressure
  • Instability in several key markets could weigh on sentiment
  • Long-term China growth trajectory remains a headwind

Asset Allocation Committee Positioning

As of 29 February 2020

Portfolio Implementation

As of 29 February 2020

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 globalfixed 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 arecommendation 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 Disclosures” on final page for information about this MSCI information.
Source for Bloomberg Barclays index data: Bloomberg Index Services Ltd. Copyright© 2020, Bloomberg Index Services Ltd. Used with permission.

Additional Disclosures

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 2020 FactSet. All Rights Reserved.

Used with permission of Bloomberg Finance L.P.

Copyright © 2020, S&P Global Market Intelligence (and its affiliates, as applicable). Reproduction of any information, data or material, including ratings (“Content”) in any form is prohibited except with the prior written permission of the relevant party. Such party, its affiliates and suppliers (“Content Providers”) do not guarantee the accuracy, adequacy, completeness, timeliness or availability of any Content and are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, or for the results obtained from the use of such Content. In no event shall Content Providers be liable for any damages, costs, expenses, legal fees, or losses (including lost income or lost profit and opportunity costs) in connection with any use of the Content. A reference to a particular investment or security, a rating or any observation concerning an investment that is part of the Content is not a recommendation to buy, sell or hold such investment or security, does not address the suitability of an investment or security and should not be relied on as investment advice. Credit ratings are statements of opinions and are not statements of fact.

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.

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.

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, 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. The views contained herein are as of the date noted on thematerial 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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