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T. Rowe Price ("TRP") claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. T. Rowe Price has been independently verified for the twenty four-year period ended June 30, 2020, by KPMG LLP. The verification report is available upon request. A firm that claims compliance with the GIPS standards must establish policies and procedures for complying with all the applicable requirements of the GIPS standards. Verification provides assurance on whether the firm’s policies and procedures related to composite and pooled fund maintenance, as well as the calculation, presentation, and distribution of performance, have been designed in compliance with the GIPS standards and have been implemented on a firm-wide basis. Verification does not provide assurance on the accuracy of any specific performance report.

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Investment Insights

Global Asset Allocation Viewpoints

Portfolio Positioning

As of 31 August 2020

Seeing Light at the End of the Tunnel

  • We remain neutral stocks versus bonds as we balance extended equity valuations, fading fiscal support, and upcoming U.S. election risks against still ultra-low interest rates and a gradually improving economic environment.
  • Anticipating a gradual recovery as global economies emerge from coronavirus-related shutdowns, we favor cyclical exposure through U.S. small-cap and emerging markets equities in lieu of value-oriented equities. Value stocks could rally off oversold levels, but any rally is unlikely to be sustained as it may require a stronger growth environment, higher rates, and durable improvement in energy prices.
  • Within fixed income, we remain overweight high yield and emerging market bonds given still attractive yield levels. Stabilizing growth and low rates should be supportive for fundamentals, while selectivity remains important.

Market Themes

As of 31 August 2020

Inflated Expectations?

After more than a decade of below-target inflation in the U.S., some investors are speculating that inflation may finally rise due to the magnitude of monetary stimulus coinciding with fiscal stimulus supporting the economic recovery from the coronavirus-induced recession. Historically, inflation and money supply have been highly correlated—with increased money supply leading to more money chasing fewer goods—ultimately leading to higher prices. However, despite increased stimulus following the global financial crisis (GFC), over the past 10 years, inflation in consumer prices has remained muted, while only asset prices have increased. An uptick in inflation could provide a long-awaited boost to cyclically oriented companies at the expense of highly valued growth stocks, especially high-flying tech stocks that have led the stock market. The Fed’s recent policy change emphasizing “average” inflation of 2% suggests lower rates for longer and a willingness to overshoot on inflation. Could a return of inflation be the catalyst needed to get a sustained rotation from growth to value stocks?

U.S. Inflation Expectations
As of 31 August 2020

Past performance is not a reliable indicator of future performance.
Sources: Bloomberg Finance L.P., Bloomberg Services Limited., Standard & Poor’s. Please see additional disclosures on the final page.
U.S. Inflation Expectations are represented by Bloomberg Barclays U.S. 10 Year Breakeven. S&P Home Builders Index is represented by the S&P Home Builders Industry Select Index.

A Trillion Here, a Trillion There

Democrats in Congress and the Trump administration remain at a stalemate over additional fiscal support for American workers after earlier stimulus measures expired in July. Consumer spending received a boost in recent months from the nearly U.S. $2.8 trillion in fiscal measures passed in March, but it may begin to falter if additional support isn’t agreed upon soon. In early August, the president signed executive orders to extend enhanced employment benefits and halt evictions as the sides had made little progress. About a trillion dollars still separates the two sides and aid to state and local governments continues to be the biggest sticking point. While the consequences of not acting quickly could surely have a negative impact on the economy, further stimulus measures could cause U.S. public debt to reach U.S. $30 trillion next year, pushing the ratio of U.S. debt to gross domestic product to levels not seen since World War II. While there is no doubt that additional stimulus may be necessary to lift the economy out of the current crisis, Americans can only hope Washington is getting the best bang for the trillions it is spending.

U.S. Debt Outstanding
As of 31 August 2020

Past performance is not a reliable indicator of future performance.
Sources: Bloomberg Finance L.P., Bloomberg Services Limited., Standard & Poor’s. Please see additional disclosures on the final page.
U.S. Inflation Expectations are represented by Bloomberg Barclays U.S. 10 Year Breakeven. S&P Home Builders Index is represented by the S&P Home Builders Industry Select Index.

Home Improvement

As many businesses and households continue to struggle amid the coronavirus pandemic, one surprising bright spot in the economy has been the U.S. housing market. Demographic trends, ultra-low interest rates, tight supply, work-from-home capabilities, and urban flight have driven demand for existing and new home sales higher, leading to bidding wars and soaring home prices. A strong housing market could provide a boost for the economy as home purchases often lift other sectors through lending and spending on furniture, appliances, and renovations. The stock market has cheered the news, with the Home Builders Index up 120% since March lows. The irony is that while housing is surging, we’re in the midst of recovering from the deepest recession in U.S. history, with unemployment still at high levels. Is it possible that the coronavirus has created structural changes in the way home ownership is viewed going forward?

Home Builders Index
As of 31 August 2020

Past performance is not a reliable indicator of future performance.
Sources: Bloomberg Finance L.P., Bloomberg Services Limited., Standard & Poor’s. Please see additional disclosures on the final page.
U.S. Inflation Expectations are represented by Bloomberg Barclays U.S. 10 Year Breakeven. S&P Home Builders Index is represented by the S&P Home Builders Industry Select Index.

Regional Backdrop

As of 31 August 2020

United States

  • Unprecedented levels of monetary and fiscal support
  • Greater share of secularly advantaged companies (e.g., cloud computing, internet retail) than rest of the world
  • Healthy consumer balance sheets prior to the crisis
  • Heightened political tensions
  • Substantial corporate leverage going into the crisis
  • Elevated government debt levels
  • U.S. dollar strength has faded


  • EU recovery fund provides further fiscal stimulus and is the first step toward a fiscal union
  • Monetary policy remains very accommodative
  • Equity valuations are inexpensive
  • Strong EUR outlook
  • Lower share of secularly advantaged companies
  • Banking sector was weak going into the crisis
  • Weak economic growth going into the crisis
  • Limited scope for ECB to stimulate further

Developed Asia/Pacific

  • Outbreaks in this region have thus far been milder than in the rest of the world
  • Strong fiscal and monetary support
  • Japanese companies generally hold high cash levels, meaning they have more cushion for weakness
  • Weak economic growth going into the crisis, driven by long-term demographic headwind
  • Highly sensitive to global industrial production, trade trends, and natural resource prices, which have improved but remain low
  • Japan faces political uncertainty due to the resignation of Prime Minister Shinzō Abe

Emerging Markets

  • Chinese economy has largely rebounded
  • U.S. dollar strength has eased
  • Dovish Fed has given central banks flexibility to ease
  • Equity valuations attractive relative to developed markets
  • Virus spread still increasing in some areas
  • Limited ability to enact fiscal stimulus (excluding China)
  • Highly sensitive to global industrial production, trade trends, and natural resource prices, which have improved but remain low

Asset Allocation Committee Positioning

As of 31 August 2020

Portfolio Implementation

As of 31 August 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 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.
Source for Bloomberg Barclays index data: Bloomberg Index Services Limited. Please see “Additional Disclosures” on final page for information.

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.
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.
Bloomberg Index Services Limited. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). BARCLAYS® is a trademark and service mark of Barclays Bank Plc (collectively with its affiliates, “Barclays”), used under license. Bloomberg or Bloomberg’s licensors, including Barclays, own all proprietary rights in the Bloomberg Barclays Indices. Neither Bloomberg nor Barclays approves or endorses this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith.
The S&P 500 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 is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, 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.

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 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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