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Global Asset Allocation: November Insights

Yoram Lustig, CFA, Head of Multi-Asset Solutions, EMEA

MARKET INSIGHTS

As of October 31, 2019

Down But Not Out

After 21 months of slowing global growth, we are starting to see signs of stabilization, signaled by a potential bottoming in the industrial economy. The J.P. Morgan Global Manufacturing PMI ticked up in October—the indicator’s third increase in a row—tempering recession fears. The loosening of global financial conditions starting to kick in, resiliency of the U.S. consumer, receding trade war uncertainty, and progress on Brexit have all contributed to the rosier sentiment shift. However, some economic data remain worrisome and business investment remains on the sidelines, questioning the sustainability of the stabilization.
 

“Buck‑ing” the Trend

Since 2011, the U.S. dollar (USD) has been on a steady upward trajectory as U.S. growth and interest rates have outpaced other developed markets. However, in October, the trade‑weighted U.S. dollar index tumbled 2% as easing trade tensions and optimism around Brexit moved demand away from “safe‑haven” assets. Perhaps the recent stabilization in global growth and abating recession fears could give other currencies legs versus the USD going forward. Emerging markets would be the primary beneficiaries of this USD regime shift, as it would reduce their USD‑linked debt obligations. However, with the Fed indicating a reluctance to cut interest rates, we could see the U.S. dollar hold its ground a bit longer.
 

Earnings: A Bit Better Than Nothing?

With earnings season winding down, results have been modestly better than expected and may even escape a negative earnings‑per‑share print for Q3. Weakening revenues, margin pressures, cost savings, and trade tensions have been the focus of many companies’ earnings reports. Several companies have also highlighted their reluctancy to deploy capital given the large amount of uncertainty remaining in the macro backdrop. In Q3, weakening energy prices have been a major theme, with energy company earnings down over 30%. Expectations for 2020 earnings remain elevated, with a growth rate still targeting more than 9%, although many predict estimates could be revised lower should growth and capex remain tempered amid trade and election concerns.

 

For a region-by-region overview, download the PDF.

 

IMPORTANT INFORMATION

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 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.

The material is not intended for use by persons in jurisdictions which prohibit or restrict the distribution of the material and in certain countries the material is provided upon specific request.  

It is not intended for distribution to retail investors in any jurisdiction.

 

201911‑1005748

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