Skip to main content

Download

Audience for the document: Share Class: Language of the document:

Download

Share Class: Language of the document:

Change Details

If you need to change your email address please contact us.
Subscriptions
OK
You are ready to start subscribing.
Get started by going to our products or insights section to follow what you're interested in.

Products Insights

GIPS® Information

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.

TRP is a U.S. investment management firm with various investment advisers registered with the U.S. Securities and Exchange Commission, the U.K. Financial Conduct Authority, and other regulatory bodies in various countries and holds itself out as such to potential clients for GIPS purposes. TRP further defines itself under GIPS as a discretionary investment manager providing services primarily to institutional clients with regard to various mandates, which include U.S, international, and global strategies but excluding the services of the Private Asset Management group.

A complete list and description of all of the Firm's composites and/or a presentation that adheres to the GIPS® standards are available upon request. Additional information regarding the firm's policies and procedures for calculating and reporting performance results is available upon request

Other Literature

You have successfully subscribed.

Notify me by email when
regular data and commentary is available
exceptional commentary is available
new articles become available

Thank you for your continued interest

Please enter valid search characters

12 January 2021 / INVESTMENT INSIGHTS

Global Asset Allocation Viewpoints

January 2021

Portfolio Positioning

As of 31 December 2020

It’s Not All Cyclical

  • Within equities, we adjusted our regional positioning among developed markets by adding to Japan, funded from Europe, while remaining underweight the U.S. Although both Japan and Europe should benefit from the cyclical recovery, Japan is supported by Prime Minister Yoshihide Suga’s emphasis on shareholder-friendly reforms and investment in productivity enhancing initiatives.
  • Within fixed income, we continued to reallocate a portion of our below investment-grade exposure from high yield bonds into floating rate loans based on loans’ more attractive relative valuations, shorter-duration profile and higher standing in the capital structure.
  • Overall, we remain neutral stocks versus bonds as we balance broadly extended valuations in both markets and near-term risk of increasing coronavirus cases versus ultra-supportive monetary and fiscal policies and progress toward vaccinations.

Market Themes

As of 31 December 2020

Chasing Unicorns

Unprecedented monetary and fiscal stimulus and late year positive news on vaccines fueled a relentless rally in risk assets in 2020, with the S&P 500 returning over 16%, and pushing valuations to levels not seen since the tech bubble. Market momentum has been further fueled by an astounding number of companies going public, with initial public offering (IPO) activity at its highest level in two decades. Many of these unicorn companies–those going public with multi-billion-dollar valuations–such as Airbnb and DoorDash, both of which are still losing money, saw their prices soar more than 80% in the week they launched. Investors similarly have been hot to jump into special purpose acquisition companies (SPACs), or “blank check” companies, that pool together investors’ money through an IPO before deciding what to invest in. Cryptocurrencies have also garnered significant interest this year, further fueling the speculative enthusiasm. Going into 2021, investors don’t seem fazed that these signs of excess could be foreshadowing a replay of 2000, and companies seeking to go public don’t appear to be slowing down anytime soon.

U.S. IPO Activity

As of 31 December 2020

U.S. IPO Activity

Past performance is not a reliable indicator of future performance.
Sources: Nikkei, Bloomberg Finance L.P, T. Rowe Price analysis using data from FactSet Research Systems Inc. All rights reserved. See Additional Disclosures at the end of the presentation.
FOR INVESTMENT PROFESSIONALS ONLY. NOT FOR FURTHER DISTRIBUTION.

Inflation, for real?

After more than a decade of Fed policy geared towards stimulating growth and higher inflation, could the recovery from the coronavirus finally be the catalyst for higher prices? The market seems to be betting that it could with breakeven rates–the yield difference between nominal and inflation-linked Treasuries–nearing the 2% level. With high expectations for unleashed pent-up demand on the way, supply will have to play catch-up in the second half of 2021, likely pushing inflation higher. One key component of the consumer price index, shelter prices, have already received a boost as the coronavirus has unexpectedly fueled a housing boom. Back in August, the Fed unveiled a new approach, allowing inflation to “average” 2% over time, with an emphasis on sustained growth. Given the new policy, inflation expectations may be allowed to move higher into 2021 with markets less fearful of the Fed. With the Fed remaining anchored and higher inflation, real yields could be pushed even lower.

U.S. 10-Year Breakeven Rate

As of 31 December 2020

U.S. 10-Year Breakeven Rate

Past performance is not a reliable indicator of future performance.
Sources: Nikkei, Bloomberg Finance L.P, T. Rowe Price analysis using data from FactSet Research Systems Inc. All rights reserved. See Additional Disclosures at the end of the presentation.
FOR INVESTMENT PROFESSIONALS ONLY. NOT FOR FURTHER DISTRIBUTION.

Suga High

Investors have newfound interest in Japan as evident in strong flows, the Nikkei 225 Index reaching a 30-year high, and optimism surrounding the election of new Prime Minister Yoshihide Suga last September. Suga, while dealing with the impacts of the coronavirus, has promised to remain focused on the structural reform policies of his predecessor, also known as “Abenomics,” that have driven shareholder-friendly initiatives, including an acceleration in share buybacks. He additionally created a new digital agency focused on the need to improve productivity, a problem that still plagues the government and many companies, even though Japan is known as a powerhouse of technical innovation in areas such as semiconductors and robotics. While cheering these structural reforms, investors also see the opportunity for Japan’s heavily export-oriented sectors to benefit as global economies reemerge from lockdowns this year. With these cyclical and secular forces helping to drive growth, there may be more to cheer about in Japan this summer than just the Olympic games.

Nikkei 225 Index

As of 31 December 2020

Nikkei 225 Index

Past performance is not a reliable indicator of future performance.
Sources: Nikkei, Bloomberg Finance L.P, T. Rowe Price analysis using data from FactSet Research Systems Inc. All rights reserved. See Additional Disclosures at the end of the presentation.
FOR INVESTMENT PROFESSIONALS ONLY. NOT FOR FURTHER DISTRIBUTION.

Regional Backdrop

As of 31 December 2020

United States

Positives

  • More fiscal support on the way
  • Monetary policy remains very accommodative
  • Healthy consumer balance sheets and high savings rate
  • Low rates driving strong housing market

Negatives

  • Increasing COVID-19 cases
  • Expensive stock and bond valuations
  • Elevated corporate and government debt levels
  • U.S. dollar weakness

Europe

Positives

  • Higher exposure to more cyclically oriented sectors that should benefit from economic recovery
  • Monetary and fiscal policy remain accommodative
  • Equity valuations remain attractive
  • Stronger long-term euro outlook

Negatives

  • New lockdowns amid second wave of coronavirus
  • Elongated process to enact further stimulus
  • Brexit likely to negatively impact trade
  • Less scope for European Central Bank to stimulate further
  • Limited long-term catalysts for growth

Developed Asia/Pacific

Positives

  • Outbreaks milder than in the rest of the world thus far
  • Strong fiscal and monetary support
  • Improving corporate governance
  • Equity valuations are inexpensive

Negatives

  • Weak economic growth going into crisis, driven by longterm demographic headwind
  • Highly sensitive to global industrial production, trade trends, and natural resource prices, which have improved but remain low

Emerging Markets

Positives

  • Chinese economy has largely rebounded
  • U.S. dollar weakness
  • Exposure to cyclical areas of economy should benefit from broad global recovery
  • Equity valuations attractive relative to developed markets

Negatives

  • Limited ability to enact fiscal stimulus (excluding China)
  • Capacity and infrastructure to combat COVID-19 vary
  • Stimulus from China likely to fade going forward

Asset Allocation Committee Positioning

As of 31 December 2020

Portfolio Implementation

As of 31 December 2020

Portfolio Implementation

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 2021 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.


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

The specific securities identified and described are for informational purposes only and do not represent recommendations.

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.

Canada - Issued in Canada by T. Rowe Price (Canada), Inc. T. Rowe Price (Canada), Inc.’s investment management services are only available to Accredited Investors as defined under National Instrument 45-106. T. Rowe Price (Canada), Inc. enters into written delegation agreements with affiliates to provide investment management services.

© 2021 T. Rowe Price. All rights reserved. T. ROWE PRICE, INVEST WITH CONFIDENCE and the bighorn sheep design are, collectively and/or apart, trademarks or registered trademarks of T. Rowe Price Group, Inc.

Previous Article

11 January 2021 / ASSET ALLOCATION VIEWPOINT

A Broader Tilt to Value
Next Article

19 January 2021 / U.S. ELECTION

What Georgia Senate Results Could Mean for Markets
202101-1470901

You are now leaving the T. Rowe Price website

T. Rowe Price is not responsible for the content of third party websites, including any performance data contained within them. Past performance cannot guarantee future results.