Skip to main content

Download

Audience for the document: Share Class: Language of the document:

Download

Share Class: Language of the document:

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 twenty four-year period ended June 30, 2020, 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

Please enter valid search characters

11 November 2020 / INVESTMENT INSIGHTS

Global Asset Allocation Viewpoints

November 2020

Portfolio Positioning

As of 31 October 2020

Quality Control

  • We are adding back to quality in fixed income by moderating our underweight position to long-dated U.S. Treasuries as yields at the long end of the curve have moved higher off March lows. We are funding the trade from U.S. investment grade and emerging market (EM) bonds to increase ballast versus extended equity markets. We remain modestly overweight high yield bonds as relative yields and demand remain supportive and expectations for elevated default levels have moderated.
  • We remain neutral stocks versus bonds as we balance broadly extended valuations in both markets against downside risks from increasing coronavirus cases and fallout from the U.S. elections versus ultra-supportive monetary policy, upside potential from fiscal policy, and the prospects for a vaccine early next year.
  • Within equities, we have a modest tilt toward U.S. value-oriented equities as they may benefit from gradually improving economic growth and a steeping yield curve. We hold modest tilts to other cyclically exposed sectors, including U.S. small-cap and EM equities both of which are supported by attractive relative valuations and potential for further policy support.

Market Themes

As of 31 October 2020

Blue Ripple?

Although the results of the U.S. elections remain unknown, one outcome that is increasingly probable is a Biden presidency with Republicans maintaining control of the Senate. Most polls heading into the election were predicting the possibility of a “Blue Wave,” leading to a Democratic President, Senate and House that could have resulted in higher levels of fiscal spending countered by the potential for policies of higher taxes. As the counting continues, markets appear to be celebrating the potential for a divided government, tempering the chances for more aggressive policies by either party and hopefully leading to an environment of more compromise. One area that may come into focus is regulation, with a spotlight on the technology sector, as there appears to be bi-partisan support for such measures. If the increasingly likely outcome of a divided government holds, a more balanced political environment could potentially lead to reduced market volatility and a more supportive backdrop for risk assets.

VIX Index1

As of 5 November 2020

VIX Index

Past performance is not a reliable indicator of future performance.
Sources: Bloomberg Finance L.P., Bloomberg Services Limited., Standard & Poor’s, NAREIT/FTSE. Please see additional disclosures on the final page.
1 VIX represents CBOE Volatility Index (VIX).
U.S. Home Builders Index is represented by the National Association of Home Builders Market Index. Retail REIT Index is represented by FTSE NAREIT Retail Property Sector Index. Grey shaded area represents the recent sell-off in S&P 500.
FOR INVESTMENT PROFESSIONALS ONLY. NOT FOR FURTHER DISTRIBUTION.

Insurance Canceled

Heading into the election, U.S. Treasury yields remained range-bound to slightly higher despite bouts of increased volatility and stocks selling off. While stock and bond correlations move around over time, their prices have historically been negatively correlated during periods of market stress where risk assets sell-off with investors fleeing to the safety of U.S. Treasuries. As volatility picked up, investors took notice as this reliable insurance policy did not respond. It appeared stocks were reacting to short-term risks of an unsettled, chaotic election, while bonds looked through to the potential for fiscal spending that could move yields higher. With yields hovering at record low levels, investors may not be getting compensated for the increased duration risk if rates were to revert higher. While investors may be rethinking how to hedge against their equity exposures, U.S. Treasuries still provide ballast even if their positive appreciation may be tempered at current levels, and importantly provide liquidity when it’s at a premium.

S&P 500 vs. U.S. 10 Year Treasury Yield

As of 31 October 2020

S&P 500 vs. U.S. 10 Year Treasury Yield

Past performance is not a reliable indicator of future performance.
Sources: Bloomberg Finance L.P., Bloomberg Services Limited., Standard & Poor’s, NAREIT/FTSE. Please see additional disclosures on the final page.
1 VIX represents CBOE Volatility Index (VIX).
U.S. Home Builders Index is represented by the National Association of Home Builders Market Index. Retail REIT Index is represented by FTSE NAREIT Retail Property Sector Index. Grey shaded area represents the recent sell-off in S&P 500.
FOR INVESTMENT PROFESSIONALS ONLY. NOT FOR FURTHER DISTRIBUTION.

There’s No Place Like Housing

Amid the upheaval brought on by the coronavirus pandemic, real estate markets across the board have been impacted on an unprecedented scale. On one hand, the residential housing market continues to boom, spurred on by low rates and a resilient consumer. Many home buyers are fleeing big cities for more space, as several major companies have extended work from home provisions. However, in stark contrast, commercial real estate, particularly retail, office space and hotels have continued to face headwinds. Trends that began to take hold pre-coronavirus, such as moves towards online versus brick-and-mortar retail have been further perpetuated by the pandemic. Similarly, demand for office space could be impaired going forward as working from home trends may become more permanent. If these trends persist, areas of the market exposed to commercial real estate, such as office and retail REITs will remain challenged.

Residential vs. Commercial Real Estate

As of 31 October 2020

Residential vs. Commercial Real Estate

Past performance is not a reliable indicator of future performance.
Sources: Bloomberg Finance L.P., Bloomberg Services Limited., Standard & Poor’s, NAREIT/FTSE. Please see additional disclosures on the final page.
1 VIX represents CBOE Volatility Index (VIX).
U.S. Home Builders Index is represented by the National Association of Home Builders Market Index. Retail REIT Index is represented by FTSE NAREIT Retail Property Sector Index. Grey shaded area represents the recent sell-off in S&P 500.
FOR INVESTMENT PROFESSIONALS ONLY. NOT FOR FURTHER DISTRIBUTION.

Regional Backdrop

As of 31 October 2020

United States

Positives

  • Unprecedented levels of monetary and fiscal support
  • Greater share of secularly advantaged companies (e.g., cloud computing, internet retail) than rest of the world
  • Healthy consumer balance sheets prior to the crisis

Negatives

  • Heightened political tensions
  • Elevated corporate leverage going into the crisis
  • Elevated government debt levels
  • U.S. dollar strength has faded

Europe

Positives

  • EU recovery fund provides significant fiscal stimulus and is the first step toward a fiscal union
  • Monetary policy remains very accommodative
  • Equity valuations are inexpensive
  • Stronger long-term EUR outlook

Negatives

  • Second wave of virus leading to new lockdowns
  • Elongated process to enact further stimulus
  • Brexit likely to negatively impact trade
  • Lower share of secularly advantaged companies
  • Banking sector weakened by negative rates
  • Limited scope for ECB to stimulate further

Developed Asia/Pacific

Positives

  • Outbreaks in this region have thus far been milder than in the rest of the world
  • Strong fiscal and monetary support
  • Smooth political transition in Japan gives hope that reforms will continue
  • Equity valuations are inexpensive

Negatives

  • Weak economic growth going into crisis, driven by long term demographic headwind
  • Highly sensitive to global industrial production, trade trends, and natural resource prices, which have improved but remain low
  • Experiencing a weaker recovery than other developed regions

Emerging Markets

Positives

  • Chinese economy has largely rebounded
  • U.S. dollar strength has eased
  • Relatively high share of secularly advantaged companies (e.g., cloud computing, internet retail)
  • Equity valuations attractive relative to developed markets

Negatives

  • Limited ability to enact fiscal stimulus (excluding China)
  • Highly sensitive to global industrial production and trade trends, which have improved but remain muted

Asset Allocation Committee Positioning

As of 31 October 2020

Portfolio Implementation

As of 31 October 2020

Portfolio Implementation

1 U.S. small-cap includes both small- and mid-cap allocations.
Source: T. Rowe Price. Unless otherwise stated, all market data are sourced from FactSet. Copyright 2020 FactSet. All Rights Reserved.
Bloomberg Index Services Limited. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). BARCLAYS® is a trademark and service mark of Barclays Bank Plc (collectively with its affiliates, “Barclays”), used under license. Bloomberg or Bloomberg’s licensors, including Barclays, own all proprietary rights in the Bloomberg Barclays Indices. Neither Bloomberg nor Barclays approves or endorses this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith.
The S&P 500 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”); T. Rowe Price 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 500.
FTSE is a trade mark of the LSE Group and is used by FTSE International Limited (“FTSE”) under license. “NAREIT” is a trade mark of the Nareit. All rights in the FTSE NAREIT Retail Property Sector Index. (the “Index”) vest in FTSE and Nareit. Neither FTSE, nor the LSE Group, nor Nareit accept any liability for any errors or omissions in the indexes or data and no party may rely on any indexes or data contained in this communication. No further distribution of data from the FTSE or Nareit is permitted without the relevant FTSE’s express written consent. FTSE, the LSE Group, and Nareit do not promote, sponsor or endorse the content of this communication.
Information presented herein is hypothetical in nature and is shown for illustrative, informational purposes only. It is not intended to be investment advice or a recommendation to take any particular investment action. This material is not intended to forecast or predict future events and does not guarantee future results.
These are subject to change without further notice. Figures may not total due to rounding.
Neutral equity portfolio weights representative of a U.S.-biased portfolio with a 70% U.S. and 30% international allocation; includes allocation to real assets equities. Core fixed income allocation representative of U.S.-biased portfolio with 55% allocation to U.S. investment grade.

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 a 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 that 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.

USA: For Institutional Investor Use Only. T. Rowe Price Investment Services, Inc., and T. Rowe Price Associates, Inc.

Morningstar Awards 2020©. Morningstar, Inc. All Rights Reserved. Awarded to T. Rowe Price for 2020 U.S. Morningstar Exemplary Stewardship and to Jerome Clark for 2020 U.S. Morningstar Outstanding Portfolio Manager, U.S.A.

© 2020 T. Rowe Price. All rights reserved. T. ROWE PRICE, INVEST WITH CONFIDENCE and the bighorn sheep design are, collectively and/or apart, trademarks or registered trademarks of T. Rowe Price Group, Inc.

Previous Article

10 November 2020 / INVESTMENT INSIGHTS

Pension Curve Insider: LDI Solutions October Monthly Recap
Next Article

13 November 2020 / Monthly Market Review

Global Markets Monthly Update
202011-1403953

You are now leaving the T. Rowe Price website

T. Rowe Price is not responsible for the content of third party websites, including any performance data contained within them. Past performance cannot guarantee future results.