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

11 March 2021 / INVESTMENT INSIGHTS

Global Asset Allocation Viewpoints

March 2021

Portfolio Positioning

As of 28 February 2021

Inflation Protection

  • Within equities, we added to real assets-related equities, moderating our underweight, as the expected economic recovery fueled by ultra-supportive policies and unleashed pent-up demand could push prices higher in the coming months.
  • A similar theme within fixed income, we added to short-term Treasury inflation protected securities (TIPS) from cash on expectations for rising inflation.
  • Within developed market equities, we further increased our exposure to Japan, funded from Europe, while remaining underweight U.S. equities. Among developed markets, Japan is highly levered to global trade, which should continue to improve as global economies re-emerge over the coming months.

Market Themes

As of 28 February 2021

Your Move, Mr. Powell?

After years of muted inflation, investors are becoming concerned as a massive amount of pent-up demand is expected to be unleashed as the economy re-emerges in the coming months, bringing higher price pressures. The excess savings that consumers have accumulated over the past year, plus an additional near USD 1.9 trillion fiscal package on the way, could also lead to demand outstripping existing supply, placing upward pressure on prices. As inflation expectations have already breached the 2% threshold, investors are beginning to question the resolve of the Fed to hold monetary stimulus at current levels. So far, Fed Chairman Jerome Powell has repeatedly reiterated a dovish stance, stating that price pressures are likely to be mild and temporary. Until unemployment levels make significant strides toward the Fed’s goals, an easy monetary policy appears to be staying in place. Currently, the bond market’s recent rise in yields may already be containing inflation for the Fed; however, if rates continue to increase, the Fed may need to step in and take action to rein in longer-term rates.

Value vs. Growth & Treasury Yield Spread1

As of 28 February 2021

Value vs. Growth & Treasury Yield Spread

Past performance is not a reliable indicator of future performance.
1 Value represented by Russell 3000 Value Index. Growth represented by Russell 3000 Growth Index. Treasury Yield Spread represents the difference between the U.S. 10-Year and 2-Year Treasury Yields.
2 Chart represented by monthly data from 31 December 1978 to 28 February 2021. Fwd. P/E represented by the Russell 1000 Index.
3 Demand minus Supply is based on 12 month averages. Oil Price represented by Brent crude oil prices.
Sources: OECD/Haver Analytics, London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”), T. Rowe Price analysis using data from
FactSet Research Systems Inc. All rights reserved. Please see Additional Disclosures for information about this FTSE Russell information.
FOR INVESTMENT PROFESSIONALS ONLY. NOT FOR FURTHER DISTRIBUTION.

Yield Scare

The recent sharp spike in yields is scaring equity investors, who, this time last year, saw the 10-year Treasury yield dip below 1% for the first time. Although rising rates are often a sign of healthy economic growth and should benefit cyclical sectors, such as financials, energy, and industrials, they may spell trouble for higher-growth sectors, like technology, that have benefited in an environment of scarce growth and low rates. The high-flying technology sector’s extended valuations may become harder to justify amid rising rates. More broadly higher rates could impact borrowing costs for companies and weigh on certain sectors, such as housing, that have benefited from low rates. While historically we are far from yield levels that have negatively impacted stocks, what is unique today is that we are starting from a level of zero policy rates, high-equity valuation levels, and the market dominance of technology and related sectors. A further rate rise could challenge broad markets as investors continue to rotate away from higher growth stocks, such as technology into more cyclically oriented sectors.

Historical Stock Valuations vs. Interest Rates2

As of 28 February 2021

Historical Stock Valuations vs. Interest Rates

Past performance is not a reliable indicator of future performance.
1 Value represented by Russell 3000 Value Index. Growth represented by Russell 3000 Growth Index. Treasury Yield Spread represents the difference between the U.S. 10-Year and 2-Year Treasury Yields.
2 Chart represented by monthly data from 31 December 1978 to 28 February 2021. Fwd. P/E represented by the Russell 1000 Index.
3 Demand minus Supply is based on 12 month averages. Oil Price represented by Brent crude oil prices.
Sources: OECD/Haver Analytics, London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”), T. Rowe Price analysis using data from
FactSet Research Systems Inc. All rights reserved. Please see Additional Disclosures for information about this FTSE Russell information.
FOR INVESTMENT PROFESSIONALS ONLY. NOT FOR FURTHER DISTRIBUTION.

Pedal to the Metal

Commodity markets have climbed to their highest level since 2018 on hopes for a rebound in demand as the global economy reopens and travel resumes later this year. After collapsing in 2020 amid the pandemic-driven shock, oil prices have reached recent highs as demand has gradually recovered, and supply has not kept pace, partially due to supply cut agreements from OPEC+. Industrial metals such as copper have also been on a tear, further supported by a shift in focus toward renewable energy and electric vehicle technology. Some investors are suggesting that the commodity rally may have more durability as the worldwide push for cleaner, greener energy could keep upward pressure on commodities such as copper, platinum, and lithium for years to come, many with limited supply. After years of underperformance, a new commodity super cycle could be emerging with cyclical and secular trends finally in their favor, particularly among industrial metals. As inflation expectations continue to rise amid evidence of increasing demand, real assets equities could be poised to outperform broader markets.

Oil Demand/Supply & Oil Prices3

As of 28 February 2021

Oil Demand/Supply & Oil Prices

Past performance is not a reliable indicator of future performance.
1 Value represented by Russell 3000 Value Index. Growth represented by Russell 3000 Growth Index. Treasury Yield Spread represents the difference between the U.S. 10-Year and 2-Year Treasury Yields.
2 Chart represented by monthly data from 31 December 1978 to 28 February 2021. Fwd. P/E represented by the Russell 1000 Index.
3 Demand minus Supply is based on 12 month averages. Oil Price represented by Brent crude oil prices.
Sources: OECD/Haver Analytics, London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”), T. Rowe Price analysis using data from
FactSet Research Systems Inc. All rights reserved. Please see Additional Disclosures for information about this FTSE Russell information.
FOR INVESTMENT PROFESSIONALS ONLY. NOT FOR FURTHER DISTRIBUTION.

Regional Backdrop

As of 28 February 2021

United States

Positives

  • More fiscal support on the way
  • Vaccination roll-out under-way, COVID-19 cases falling
  • Monetary policy remains very accommodative
  • Healthy consumer balance sheets and high savings rate

Negatives

  • Elevated stock and bond valuations
  • Corporate and government debt at high levels
  • U.S. dollar weakness continues
  • Unemployment remains elevated

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 to the U.S.
  • Stronger long-term euro outlook

Negatives

  • Vaccination effort facing supply shortages
  • Limited long-term catalysts for growth
  • Limited scope for European Central Bank to stimulate further
  • Brexit likely to negatively impact trade

Developed Asia/Pacific

Positives

  • Outbreaks milder than in the rest of the world thus far
  • Cyclical orientation should benefit from economic rebound
  • Strong fiscal and monetary support
  • Improving corporate governance

Negatives

  • Weak economic growth going into crisis, driven by longterm demographic headwind
  • Limited long-term catalysts for growth

Emerging Markets

Positives

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

Negatives

  • Stimulus from China likely to fade going forward
  • Limited ability to enact fiscal stimulus (excluding China)
  • Vaccine supply and distribution infrastructure are well behind developed markets

Asset Allocation Committee Positioning

As of 28 February 2021

Asset Allocation Committee Positioning

Portfolio Implementation

As of 28 February 2021

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

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 March 2021 / U.S. EQUITIES

Five Macro Themes in Equity Markets to Watch Now
Next Article

March 2021 / EMERGING MARKETS

China's Economy: Recovery and Rebalancing
202103-1550533

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.