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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 August 2021

  • Global economic growth remains above trend, albeit past peak levels, supported by central bank liquidity, progress on vaccine distribution, and continued reopening momentum despite the spread of the delta variant.
  • Policy accommodation is expected to gradually tighten as central banks weigh economic growth outlook and increased coronavirus risk against more persistent inflation and improving labor markets.
  • Long-term interest rates could trend higher amid the growth and inflation outlook, but upside may be limited as growth moderates and imbalances driving inflation ease; while 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 August 2021

  • We remain modestly underweight equities relative to bonds and cash as the valuations look less compelling amid peaking growth and stimulus. Higher rates, elevated inflation, and potential tax increases could pose challenges to equities.
  • Within equities, we continue to favor value-oriented equities globally, U.S. small-caps, and emerging market stocks as we expect cyclically exposed companies to continue to benefit from still supportive but slowing economic growth and continued 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 given a constructive credit outlook.
  • Over the month, we added back to mortgage-backed securities, as valuations have become more compelling as the market anticipates tapering of mortgage-backed securities by the Fed.

Market Themes

As of 31 August 2021

Rock and a Hard Place

Coming out of the Jackson Hole Economic Symposium, Federal Reserve Chairman, Jerome Powell signaled that the Fed could begin to wind down its monthly bond buying by year-end, if the economy and coronavirus cooperate, and acknowledged that the Fed is in no hurry to raise short-term interest rates. The equity market interpreted Powell’s comments as very dovish, with the S&P 500 rallying to record high levels on hopes that monetary policy will remain loose for longer. Powell also addressed concerns about inflation, calling it hot, but temporary, attributing it to coronavirus-related supply disruptions. Recent softer than expected payroll data could also weigh against tightening as the Fed waits for more substantial progress towards employment goals. A scenario of moderating growth, waning employment, and lingering inflation could put the Fed between a rock and a hard place—with tapering too quickly potentially jeopardizing the nascent job market and complacency on inflation possibly forcing them to act more decisively down the road.

Inflation vs. Federal Reserve Assets

As of 31 July 2021

Chart illustrating inflation trends versus federal reserve assets

Source: Bloomberg Finance L.P.

Cash Hoard

Coronavirus-related shutdowns curtailed spending by both consumers and corporations alike as expenditures on services fell significantly and corporations cut spending and dividends. Consumers working in lower-earning service sectors were the hardest hit with job losses, although they found support from fiscal aid. Higher earners, for the most part, were marginally impacted as they maintained their jobs and were able to save from less spending on services, travel, and commuting. Now businesses and consumers are both seeing elevated levels of liquidity, as S&P 500 companies hold a record, USD 2 trillion in cash and as household worth remains at an all-time high. Unleashed pent-up consumer demand remains as back-to-school shopping and the holiday season kicks off, while at the same time, corporations are looking to increase dividends and share buybacks. The potential for this cash hoard to come off the sidelines could provide a strong tailwind for cyclically-exposed companies against a backdrop of fading fiscal and monetary support.

Corporate Cash & Household Net Worth1

As of 31 March 2021

Chart illustrating corporate cash versus household networth

1Corporate Cash and Household Net Worth returns are represented by the FOF Balance Sheet of Nonfinancial Corporate Checkable Deposits & Currency Asset index and the FOF Federal Reserve US Households & NPO Net Worth Nominal $ Value index respectively. Figures are shown in USD.
Source: Bloomberg Finance L.P.

Regional Backdrop

As of 31 August 2021

  Positives Negatives
United States
  • Vaccinations widely distributed
  • Infrastructure spending bill likely to be passed
  • Healthy consumer balance sheets and high savings rate
  • Exceptionally strong earnings growth
  • Elevated stock and bond valuations
  • Elevated corporate and government debt levels
  • Fed accommodation has peaked
  • Fiscal stimulus has peaked
  • Corporate taxes likely to rise
  • Delta variant spread is muting economic reopening
  • Higher exposure to more cyclically oriented sectors that should benefit from economic recovery
  • Vaccination rates improving rapidly
  • Monetary policy remain accommodative
  • Fiscal stimulus poised to get a boost from upcomingGerman elections
  • 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 auto production rebound
Developed Asia/Pacific
  • Cyclical orientation should benefit from economic rebound
  • 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)
  • New variants remain a threat to economic activity

Asset Allocation Committee Positioning

As of 31 August 2021

Chart characterizing various equities and bonds by underweight, neutral or overweight.

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

Portfolio Implementation

As of 31 August 2021

Chart demonstrating tactical allocation weights of various equities

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 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 index data: Bloomberg Index Services Limited. See additional disclosures on final page for more information.


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 securi-ties 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®” and Bloomberg Global Aggregate Index are service marks of Bloomberg Finance L.P. and its affiliates, including Bloomberg Index Services Limited (“BISL”), the administrator of the index (collectively, “Bloomberg”) and have been licensed for use for certain purposes by T. Rowe Price. Bloomberg is not affiliated with T. Rowe Price, and Bloomberg does not approve, endorse, review, or recommend Global Asset Allocation Viewpoints. Bloomberg does not guarantee the timeliness, accurateness, or completeness of any data or information relating to Global Asset Allocation Viewpoints.

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.


Any 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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