Skip to content
Search
2024 Global Market Outlook Midyear Update

How central bank policy could impact your portfolio

Download the Full Report

Investment Specialist Ritu Vohora Provides a Summary

At midyear, expectations for rate cuts have been pushed out further, with far fewer anticipated, and markets have repriced accordingly. We anticipate growth in the global economy—however, while the U.S. economy remains strong, leading indicators suggest that the narrative of U.S. exceptionalism may fade. We see continued market broadening, with select equity and fixed income opportunities. Most importantly, the ongoing transition from the low rate post-global financial crisis environment to one characterized by higher interest rates may provide favorable conditions for active managers to outperform.​

Key factors shaping our midyear market outlook

Higher for longer has become the consensus

Most developed market central banks are walking a tightrope amid reaccelerating inflation. The Federal Reserve is likely to make fewer cuts, while we believe the European Central Bank will cut between one and three times. We expect Japan to gradually tighten its monetary policy.

Key takeaway:

The Fed is more likely to surprise with fewer cuts than with more.

Opportunities broaden beyond the Magnificent Seven

We believe artificial intelligence will create long-term winners, but stock selection is key as performance of the mega-cap tech stocks begins to fragment. We anticipate a continued broadening of opportunities to include more companies and sectors that may have lagged in recent years. We believe that value—and possibly small-cap—stocks may begin to challenge the dominance of large-cap growth stocks.

Key takeaway:

Now may be the time to diversify into areas that have valuation support and robust fundamentals, such as value stocks.

Rising capital expenditure should benefit value sectors

In contrast to the U.S. market’s heavy exposure to growth stocks, the international market is more exposed to value-oriented sectors, including financials, materials, industrials, and energy. Supply chain diversification, infrastructure rebuild, defense spending, and the likelihood of higher energy prices should favor traditional value sectors as capital spending accelerates.

Key takeaway:

We continue to favor Japan and see select opportunities in emerging markets, such as South Korea and Vietnam.

Uncertain environment favors short duration bonds

Short-term bonds are highly valued during uncertain periods—such as the present—because they are less exposed to interest rate changes than longer-maturity bonds. They also provide the potential for higher returns than cash while being almost as liquid, which can be useful during periods of economic uncertainty.

Key takeaway:

We have a preference for short duration bonds. While credit spreads are tight, all-in yields look attractive, with the potential for price appreciation if yields move lower. Currently, we are overweight high yield and emerging market debt.

Energy stocks and commodities could help hedge against inflation

Stocks have typically dipped sharply during recessions and also weakened when inflation is at higher levels. However, energy sector stocks have historically performed quite well during periods of very high inflation. This suggests that one way to hedge against inflation risk would be to tilt portfolios toward stocks in the energy sector and other commodity-oriented equities.

Key takeaway:

Sticky inflation could inflect higher as global growth broadens. Commodity-oriented equities may offer an effective way to navigate inflation risk.

Want to Read the Full Global Market Outlook Midyear Update?

Download

202406-3638454

Download

Latest Date Range
Audience for the document: Share Class: Language of the document:
Download Cancel

Download

Share Class: Language of the document:
Download Cancel
Sign in to manage subscriptions for products, insights and email updates.
Continue with sign in?
To complete sign in and be redirected to your registered country, please select continue. Select cancel to remain on the current site.
Continue Cancel
Once registered, you'll be able to start subscribing.

By clicking the Continue button, I acknowledge that I have read and accepted the Privacy Notice

Continue Back

Change Details

If you need to change your email address please contact us.
Subscriptions
OK
You are ready to start subscribing.
Get started by going to our products or insights section to follow what you're interested in.

Products Insights

GIPS® Information

T. Rowe Price ("TRP") claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. T. Rowe Price has been independently verified for the 27-year period ended June 30, 2023, by KPMG LLP. The verification report is available upon request. A firm that claims compliance with the GIPS standards must establish policies and procedures for complying with all the applicable requirements of the GIPS standards. Verification provides assurance on whether the firm’s policies and procedures related to composite and pooled fund maintenance, as well as the calculation, presentation, and distribution of performance, have been designed in compliance with the GIPS standards and have been implemented on a firm-wide basis. Verification does not provide assurance on the accuracy of any specific performance report.

TRP is a U.S. investment management firm with various investment advisers registered with the U.S. Securities and Exchange Commission, the U.K. Financial Conduct Authority, and other regulatory bodies in various countries and holds itself out as such to potential clients for GIPS purposes. TRP further defines itself under GIPS as a discretionary investment manager providing services primarily to institutional clients with regard to various mandates, which include U.S, international, and global strategies but excluding the services of the Private Asset Management group.

A complete list and description of all of the Firm's composites and/or a presentation that adheres to the GIPS® standards are available upon request. Additional information regarding the firm's policies and procedures for calculating and reporting performance results is available upon request

Other Literature

You have successfully subscribed.

Notify me by email when
regular data and commentary is available
exceptional commentary is available
new articles become available

Thank you for your continued interest