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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 30 April 2022

  • Global growth are estimates trending lower on heightened geopolitical risk and COVID lockdowns in China are weighing on supply chains and potentially exacerbating already elevated inflation.
  • Despite moderating growth expectations, developed market central banks are expected to advance tightening policies to combat decades-high inflation, with the US Federal Reserve leading with the most aggressive plans. The European Central Bank (ECB) accelerates ending asset purchases and considers future rate hikes, while the Bank of Japan remains steadfast on its policy of yield curve control.
  • Emerging market central banks remain biased towards tightening to fend off inflation and defend currencies, while China policies continue moving in the opposite direction to stimulate growth to help catch up to growth targets following COVID-related lockdowns.
  • Key risks to global markets include central bank missteps, commodity impact of Russia-Ukraine conflict, lingering inflation, and China balancing growth amid COVID-related lockdowns.

Portfolio Positioning

As of 30 April 2022

  • Despite lower valuations amid recent declines, we remain underweight equities given a moderating growth and earnings outlook amid a hawkish Fed battling high inflation. Within fixed income, we remain underweight bonds and overweight cash.
  • Within equities, we continued to add to real assets-related equities to provide a hedge should inflationary pressures persist longer than expected.
  • Within fixed income, we continue to favor shorter-duration and higher-yielding sectors through overweights to short-term TIPS, floating rate loans and high yield bonds supported by still solid fundamentals while keeping a cautious eye on liquidity and volatility.
  • To provide some defense against growing market risks, we further moderated our underweight to long-term US Treasuries following recent moves higher in rates.

Market Themes

As of 30 April 2022

Where to Hide?

War, inflation, and lingering COVID impacts have set the stage for a challenging start to 2022 for investors, with both stocks and bonds down over 9% in response. While dynamic, stocks and bonds on average have a low correlation with each other and their correlation can move sharply negative during risk-off periods. However, this time is quite unique with runaway inflation sparking aggressive central bank tightening all while growth is moderating amid a world full of rising risks. These concerns of rising rates and inflation are contributing to a retreat in bonds. At the same time, rising rates and slowing growth are weighing on equity markets in a period where valuations are already above average. This unfortunate rise in stock-to-bond correlation is weighing on even the most conservative of investors. While it’s hard to gauge the path forward given the unprecedented confluence of issues facing global markets, a cautious approach is warranted, especially to mitigate more extreme tail events, including more persistent inflation or a hard landing in the economy.

Stock & Bond Correlations on the Rise1

As of 30 April 2022

Stock & Bond Correlations on the Rise

Past performance is not a reliable indicator of future performance.
Sources: Bloomberg Finance L.P. and S&P. Please see the last page for more information about this S&P information.
1 Chart represents rolling 2-year correlation of monthly price changes of the S&P 500 Index and U.S. 10-Year Treasury Futures.
2 Chart shows China Manufacturing PMI Index and China Non-Manufacturing PMI Index (representing Services PMI).

Walking a Tightrope

As the rest of the world is seeing fewer outbreaks and learning to cope with COVID, China, on the other hand, has faced a new wave of outbreaks forcing it to enact “zero-COVID” lockdown policies, which are taking a toll on the nation’s growth and potentially spilling over to the rest of the world. The stringent lockdowns in Shanghai, an export hub, and most recently in Beijing are weighing on the ability to transport goods, further impacting already fractured global supply chains. The market increasingly expects China to further ease monetary and fiscal policy in response to the recent weakness. However, as they do, they will not want to reflate speculative bubbles that they burst last year, most notably the housing sector. With the presidential election approaching, and President Xi Jinping up for an unprecedented third term, he seems determined to reach China’s lofty 5.5% gross domestic product target that is severely challenged by COVID lockdowns. This leaves policymakers walking a tightrope should they seek to maintain the aggressive lockdowns and reach growth targets, while providing just enough stimulus not to overheat some sectors of the market.

China’s Manufacturing & Services Data Taking a Hit2

As of 30 April 2022

China’s Manufacturing & Services Data Taking a Hit

Past performance is not a reliable indicator of future performance.
Sources: Bloomberg Finance L.P. and S&P. Please see the last page for more information about this S&P information.
1 Chart represents rolling 2-year correlation of monthly price changes of the S&P 500 Index and U.S. 10-Year Treasury Futures.
2 Chart shows China Manufacturing PMI Index and China Non-Manufacturing PMI Index (representing Services PMI).

Regional Backdrop

As of 30 April 2022

  Positives Negatives
United States
  • Strong corporate and consumer balance sheets
  • Pent-up demand for services and capex
  • Fed tightening at a rapid pace
  • Elevated inflation
  • Supply chain issues limiting economic activity
  • Fiscal spending is increasing
  • Equity valuations attractive relative to the US
  • European Union unity is strengthening
  • Ukraine conflict has driven energy prices sharply higher
  • Industrial production dampened by supply chain challenges
  • Limited long-term catalysts for earnings growth
Developed Asia/Pacific
  • Attractive equity valuations
  • Improving corporate governance
  • Monetary policy remains accommodative
  • Limited long-term catalysts for earnings growth
  • Global trade remains impacted by supply chain issues, geopolitical uncertainty, and COVID
Emerging Markets
  • Chinese authorities are easing policies
  • Equity valuations attractive relative to the US
  • COVID-related lockdowns have impacted economic activity
  • Chinese regulatory actions have impacted investor confidence
  • Global trade remains impacted by supply chain issues, geopolitical uncertainty, and COVID
  • Central bank accommodation is fading

Asset Allocation Committee Positioning

As of 30 April 2022


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 2022 FactSet. All Rights Reserved.
“Bloomberg®” and Bloomberg Indices 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.
The S&P 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, 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 Index.

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.
ESG and Sustainability risk – May result in a material negative impact on the value of an investment and performance of the portfolio.
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.


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