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Global Asset Allocation Viewpoints

April 2021

Market Perspective

As of 31 March 2021

  • Global economic growth expected to accelerate through the back half of the year as reopenings unleash pent-up demand, while still supported by accommodative monetary policies and additional fiscal spending within the U.S.
  • Global inflation expectations likely to trend higher as growth accelerates, supported by stronger commodities and the U.S. Fed allowing higher inflation in favor of sustained labor market recovery.
  • Asian and European economies may benefit more amid the recovery given higher cyclical exposure relative to the U.S., although aggressive fiscal spending in the U.S. could provide a tailwind.
  • Key risks to global markets include the pace of vaccinations, coronavirus mutations, potential for higher taxes as countries pivot to funding recovery costs and geopolitical concerns.

Portfolio Positioning

As of 31 March 2021

  • We shifted to a modest underweight to equities relative to bonds and cash as the risk/reward profile of equities looks less attractive after a strong multiple-driven rebound since last March’s lows.
  • Within fixed income, we favor less interest rate- and more inflation-sensitive sectors such as floating rate loans and short-term Treasury inflation protected securities (TIPS).
  • Within equities, we are further tilting into value, both in the U.S. and outside the U.S., based on more attractive relative valuations and continued improvement in growth, bolstered by fiscal stimulus in the U.S., and higher interest rates.
  • We moderated our overweight to U.S. small-cap stocks following a 100%+ return since the lows of last March; smaller companies may continue to benefit from aggressive fiscal and consumer spending, and relative valuations remain favorable.

Market Themes

As of 31 March 2021

Closing the Gap

As investors grew more optimistic late last year about the global economic recovery, small-cap stocks took off with a parabolic snapback, up over 100% since the lows of last March. While smaller companies tend to lead early in an economic recovery given their higher sensitivity to growth, the fast and furious pace of performance stands out. Meanwhile, cyclically oriented value stocks, which are also highly reliant on the trajectory of economic growth, have just begun to make up ground from the sell-off. While smaller companies may continue to benefit from reopening and stimulus in the U.S., a lot of the outperformance may be behind small-caps, while value stocks are likely to continue to benefit from the recovery, stimulus, higher rates, and the potential for infrastructure spending. After nearly a decade of underperformance, perhaps this cyclical rally may be enough for value to close the gap versus growth stocks.

Small-cap & Value Relative Performance1

From 23 March 2020 to 31 March 2021

Small-cap & Value Relative Performance

Past performance is not a reliable indicator of future performance.
1Small-cap represented by Russell 2000 Index. Large-cap represented by Russell 1000 Index. Value represented by Russell 1000 Value Index. Growth represented byRussell 1000 Growth Index.
Sources: Standard & Poor’s, Bloomberg Finance L.P., Russell, London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). T. Rowe Price calculations using data from FactSet Research Systems Inc. All rights reserved. See additional disclosures on final page for more information.

Reason to Worry?

Equity markets are riding higher on unwavering optimism, which have driven the S&P 500 up over 20% above its pre-COVID-19 levels. Despite higher valuations, bouts of risk, and pockets of froth in the market—such as in bitcoin, home prices, and special purpose acquisition companies—investors appear to have little concern. Perhaps there is no alternative to investing in equities with bond yields on the rise, but it’s hard to ignore events such as the retail investor GameStop short squeeze and enormous losses at Archegos Capital, a large private family office, which may have historically shaken the confidence of equity investors. While recent bad news is largely viewed as idiosyncratic, market valuations continue to get more extended, and the risk of one of these events sparking a more systemic sell-off could increase. But perhaps the systemic risk is already here, with the threat of even higher rates, inflation, and now taxes.

S&P 500 & U.S. 10-Year Treasury Yield

From 18 February 2020 to 31 March 2021

S&P 500 & U.S. 10-Year Treasury Yield

Past performance is not a reliable indicator of future performance.
1Small-cap represented by Russell 2000 Index. Large-cap represented by Russell 1000 Index. Value represented by Russell 1000 Value Index. Growth represented byRussell 1000 Growth Index.
Sources: Standard & Poor’s, Bloomberg Finance L.P., Russell, London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). T. Rowe Price calculations using data from FactSet Research Systems Inc. All rights reserved. See additional disclosures on final page for more information.

Regional Backdrop

As of 31 March 2021

United States


  • More fiscal support on the way
  • Pace of vaccinations has been strong
  • Monetary policy remains very accommodative
  • Healthy consumer balance sheets and high savings rate


  • Elevated stock and bond valuations
  • Corporate and government debt at high levels
  • Corporate taxes likely to rise
  • Unemployment remains elevated



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


  • Lockdowns back on due to third wave of COVID-19
  • 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


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


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

Emerging Markets


  • Exposure to cyclical areas of economy should benefit from broad global recovery
  • Commodity prices rising
  • Chinese economy remains strong
  • Equity valuations attractive relative to developed markets


  • 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
  • Inflationary pressures are rising in some countries

Asset Allocation Committee Positioning

As of 31 March 2021

Asset Allocation Committee Positioning

1For pairwise decisions in style & market capitalization, positioning within boxes represent positioning in the first mentioned asset class relative to the secondasset class.

Portfolio Implementation

As of 31 March 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 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.
Source for Bloomberg Barclays index data: Bloomberg Index Services Limited. See additional disclosures on final page for more 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.

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”). This product is 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.

London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). © LSE Group 2021. FTSE Russell is a trading name of certain of the LSE Group companies. All rights in the FTSE Russell indexes or data vest in the relevant LSE Group company which owns the index or the data. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indexes or data and no party may rely on any indexes or data contained in this communication. No further distribution of data from the LSE Group is permitted without the relevant LSE Group company’s express written consent. The LSE Group does not promote, sponsor or endorse the content of this communication.

Bloomberg Finance L.P.

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 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 a 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.

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