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Global Asset Allocation Viewpoints

Our experts share perspective on market themes and regional trends, plus insights into current portfolio positioning.

Market Perspective

As of 31 July 2021

  • Global economic growth remains strong but varied across regions, balancing progress on vaccination distribution with setbacks from growing delta variant cases.
  • While still supportive, global monetary policy is expected to continue a gradual trend toward tightening as central banks weigh moderating growth and increased coronavirus risk against more persistent inflation.
  • While global fiscal impulse continues to fade from crisis level highs, the European Union (EU) recovery fund, and potential U.S. infrastructure spending along with China’s efforts to stabilize growth could offset the pullback.
  • Longer-term interest rates could trend higher on the growth and inflation outlook, but upside may be limited as both factors move past peak levels. Short-term rates could begin to price in tighter central bank policy, leading to flatter yield curves.
  • Key risks to global markets include: the path forward for the coronavirus, elevated inflation, central bank missteps, higher taxes, a stricter regulatory environment, and increasing geopolitical concerns.

Portfolio Positioning

As of 31 July 2021

  • We remain modestly underweight equities relative to bonds and cash as the risk/reward profile looks less compelling for equities and could be vulnerable to fading policy support, higher rates, elevated inflation, and potential tax increases.
  • Within equities, we continue to favor value-oriented equities globally, U.S. small-caps, and emerging markets (EM) stocks as we expect cyclically exposed companies to continue to benefit from strong economic growth and global reopening.
  • Within fixed income, we continue to have a bias toward shorter duration and higher yielding sectors through overweights to high yield bonds and floating rate loans.
  • Over the month, we shifted our modest overweight to short-term Treasury inflation protected securities to neutral as expectations for higher inflation have been largely priced into breakeven inflation rates.

Market Themes

As of 31 July 2021

Balancing Act

At the same time that China has taken steps to stabilize its slowing economy with measures such as a surprise reserve requirement ratio cut and pledge to increase fiscal support, policymakers continued to advance social policies through increased regulation, the latest of which rattled markets. These new regulations are tied to specific priorities around ensuring data security, improving the quality and sustainability of economic growth, reducing the wealth gap, and protecting the environment. Some of the enforcement measures, like forcing the education companies to transition to not-for-profit, were seen as severe and prompted concerns that additional stringent measures for other industries may be forthcoming. Recent comments from government officials seem to indicate that this is unlikely, but were sufficient enough to worry investors. As China moves forward, stabilizing its economy while pursuing its social agenda could prove to be a tricky balancing act.

EM Ex-China vs. China Equity Index Returns1

As of 31 July 2021

EM Ex-China vs. China Equity Index Returns

Past performance is not a reliable indicator of future performance.
1 Emerging Markets Ex-China and China equity returns are represented by the MSCI Emerging Markets Ex-China and MSCI China Indices respectively. Total return in USD.
2 Value vs. Growth returns are represented by the Russell 1000 Value and Russell 1000 Growth Indices respectively.
Source: FactSet. Financial data and analytics provider FactSet. Copyright 2021 FactSet. All Rights Reserved.

Double Reversal

After lagging growth stocks for over 15 years, value was finally positioned to outperform growth last fall on expectations of sharply rebounding economic growth, higher inflation, and the unleashing of pent-up demand as lockdowns eased. That was just how the story played out until late March when markets quickly reversed and rates moved lower as the narrative changed to “peaking” growth and inflation and concerns surrounding potential Fed tapering as well as increases in delta variant cases led to a more defensive tone across markets. However, the story for value may not be over just yet, as recent underperformance has led to more attractive relative valuations, global growth remains above trend, and supply/demand imbalances continue to keep inflation stubbornly high. With the hopeful containment of the delta variant and increasing regulatory pressure on growth stocks, investors may start betting on value pulling off a double reversal this cycle.

Value vs. Growth & U.S. 10-Year Treasury Yield2

As of 31 July 2021

Value vs. Growth & U.S. 10-Year Treasury Yield

Past performance is not a reliable indicator of future performance.
1 Emerging Markets Ex-China and China equity returns are represented by the MSCI Emerging Markets Ex-China and MSCI China Indices respectively. Total return in USD.
2 Value vs. Growth returns are represented by the Russell 1000 Value and Russell 1000 Growth Indices respectively.
Source: FactSet. Financial data and analytics provider FactSet. Copyright 2021 FactSet. All Rights Reserved.

Regional Backdrop

As of 31 July 2021

  Positives Negatives
United States
  • Vaccinations widely distributed
  • Infrastructure spending bill likely to be passed
  • Healthy consumer balance sheets and high savings rate
  • Strong earnings expectations
  • Elevated stock and bond valuations
  • High corporate and government debt levels
  • Fed dovishness has peaked
  • Corporate taxes likely to rise
  • Higher exposure to more cyclically oriented sectors thatshould benefit from economic recovery
  • Vaccination rates improving rapidly
  • Monetary and fiscal policy remain accommodative
  • Equity valuations remain attractive relative to the US
  • Limited long-term catalysts for growth
  • Limited scope for European Central Bank to stimulate further
  • Brexit likely to negatively impact trade
  • Demand from China fading
  • Microchip shortage impacting manufacturing
Developed Asia/Pacific
  • Cyclical orientation should benefit from economicrebound
  • Strong fiscal and monetary support
  • Improving corporate governance
  • Vaccination effort has been slower than other developed markets
  • Weak economic growth going into crisis, driven by long term demographic headwind
  • Limited long-term catalysts for growth
Emerging Markets
  • Exposure to cyclical areas of economy should benefit from broad global recovery
  • Commodity prices are elevated
  • Equity valuations attractive relative to developed markets
  • Vaccine supply and distribution infrastructure are well behind developed markets (excluding China)
  • Stimulus from China is fading
  • Accommodation from central banks is fading
  • Limited ability to enact fiscal stimulus (excluding China)

Asset Allocation Committee Positioning

As of 31 July 2021

Asset Allocation Committee Positioning

Portfolio Implementation

As of 31 July 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. 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.

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.


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 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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