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By   Michael Walsh, CFA, CAIA®, FIA

Monthly Asset Allocation Update – June 2026

Our latest market perspectives and portfolio positioning insights

June 2026, Asset Allocation

View Transcript

Hello, I’m Eva Wu, and I’m pleased to share our April 2026 monthly asset allocation update.

Let me walk through what has driven markets this month, how markets have responded, and how we have positioned portfolios.

First, markets are being driven by a clear macro chain: geopolitics, oil, inflation, and policy. Disruptions to energy flows, particularly through the Strait of Hormuz, have introduced a meaningful supply shock, pushing energy prices higher and raising the risk of more persistent inflation. While there are signs of potential de-escalation, the timing remains uncertain, and markets are increasingly focused on second-order effects—how higher energy costs feed through to inflation, government and central bank policy and, ultimately, growth.

Second, despite the uncertain backdrop, markets have remained relatively resilient. Equity markets have been supported by still-decent real growth rates, earnings expectations and ongoing AI investment. However, beneath the surface, leadership has continued to rotate away from large-cap growth and toward value and more cyclical areas. At the same time, investors are increasingly focused on the returns from AI-related capex, as well as potential risks in areas such as private credit. In fixed income, the adjustment has been more pronounced. Yields have repriced higher, particularly at the front end, reflecting inflation concerns, while credit spreads have widened modestly but remain orderly.

As a result, we have positioned portfolios more cautiously, while remaining modestly risk-on. We reduced our overall equity overweight and shifted away from more energy-sensitive regions such as Europe, while increasing our tilt toward more resilient areas, including US large-cap value. In fixed income, we added back some duration to take profits as yields have moved higher, while remaining cautious overall. We also reduced our exposure to emerging market debt to limit risk and increased cash slightly to maintain flexibility.

Overall, while the current shock will likely pass, it may take longer than expected. We remain focused on diversification, inflation resilience and maintaining flexibility as markets adjust to a more uncertain environment.

Thank you for listening, and we look forward to sharing our next update in May.
 

Global asset allocation - as of May 2026

* For pairwise decisions in style, market capitalisation and currencies, positioning within boxes represents positioning in the first‑mentioned asset class relative to the second asset class.
The global asset allocation views are informed by T. Rowe Price Europe and UK regional investment committees. This material is not intended to be investment advice or a recommendation to take any particular investment action.
As of May 2026.

Transcript

Hello, I’m Michael Walsh and I am pleased to share our June 2026 monthly asset allocation update. As we head towards the end of the first half of the year, I’ll highlight the key investment themes shaping our outlook and how we’re positioning portfolios.

First, equity markets globally continued to rally in May.
May was another strong month for stock markets – globally up 5% for the month. The turbulence of March seemed far in the rear view mirror as strong corporate earnings and reasonable economic news kept investor sentiment upbeat. Global equities are now up 12% for 2026 to date, after gains of over 20% last year. The outlook for stocks continued to be debated internally in recent weeks given the speed of the run up. However, we are comfortable maintaining a small overweight position across equity markets worldwide. The size of the position reflects the tension between decent fundamentals, constructive earnings outlook and fiscal stimulus, against elevated valuations and ongoing geopolitical tensions in the Middle East.

Second, equity market winners earlier in 2026 have been mixed more recently.

Some of the market broadening seen in the first quarter in 2026 has been reversed in recent weeks. In particular, tailwinds from the shift to agentic AI have boosted the prospects of growth companies in the US. While scepticism over the sustainability of massive capex spending continues, the market has generally reacted positively to the results and future plans of the technology hyperscalers. Demand for AI infrastructure has boosted semiconductors and other related areas, meaning markets such as South Korea and Taiwan are amongst the best performers year to date. The shift in market sentiment away from US technology seems to have lost momentum, and fiscal stimulus, reshoring and tax changes should all continue to boost US large cap growth stocks. As a result, we have increased exposure, notably at the expense of UK equities.   

Third, we remain sceptical on the outlook for high quality fixed income markets.

The new chair of the Federal Reserve does not look to have much of a honeymoon period ahead. Central banks globally are likely to face an unpleasant trade off between inflation expectations and economic activity, as the impact of the Middle East conflict looks to persist into the summer. Despite recent rises in yields, we continue to be cautious on the outlook for duration within fixed income. We retain overweight positions in shorter duration high yield bonds globally. We also find the yields on local currency emerging market debt more compelling.

Thank you for joining us, and we’ll see you again in July for our next update.

Michael Walsh, CFA, CAIA®, FIA Solutions Strategist
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IMPORTANT INFORMATION

This material is being furnished for general informational and/or marketing purposes only. The material does not constitute or undertake to give advice of any nature, including fiduciary investment advice, nor is it intended to serve as the primary basis for an investment decision. 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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It is not intended for distribution to retail investors in any jurisdiction.

2020605-5532881

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