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Global Asset Allocation Viewpoints

A view from Canada

March 2026

Outlook

Ongoing geopolitical conflict and a more pronounced energy supply shock leading to higher inflation and rates could challenge risk assets, with valuations remaining somewhat elevated.
While recent developments in the Middle East pose risks to inflation and growth, earnings momentum and economic growth still remain favorable, underpinned by accommodative fiscal policies across many regions.
U.S. economic growth continues to show resilience driven by AI-driven capex spending, consumer spending and supportive fiscal policy. Although, weakness in the labor market warrants monitoring.
Markets outside the U.S. continue to benefit from firmer domestic demand and policy, particularly in Europe and Japan.
Canadian macro backdrop remains on positive trajectory backed by fiscal stimulus and strengthening natural resources demand. Earnings further buoyed by improving energy production efficiency.
Key risks to global markets include escalating geopolitical tensions, a resurgence in inflation, reliance on AI-driven growth,
further deterioration in labor markets, and a widening of liquidity concerns within private credit..

T. Rowe Price’s latest perspectives on global and Canadian asset allocation against a backdrop of persistent geopolitical tensions and energy market shocks. While global risk assets are challenged by inflation, higher rates, and elevated valuations, economic growth and earnings momentum remain resilient, especially in the U.S., driven by AI-related capital spending and fiscal support. Outside the U.S., Europe and Japan benefit from solid domestic demand and supportive policies, while Canada’s outlook is bolstered by fiscal stimulus and robust demand for natural resources.

Key investment themes include a shift in market preference toward “asset-heavy” sectors like energy and materials, driven by AI infrastructure buildout and rising energy prices. The team remains neutral on equities but has increased allocations to small-caps and maintains a preference for high-yield bonds and inflation-sensitive assets like short-term TIPS. Risks include further geopolitical escalation, inflation surprises, and liquidity concerns in private credit. Regionally, Canadian equities are supported by strong fundamentals but face valuation and inflation risks. Overall, the report emphasizes a balanced approach, maintaining hedges against inflation and seeking opportunities amid ongoing volatility.

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A view from Canada

Global Asset Allocation Viewpoints

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