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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.

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Maintaining a Cautious Approach

Key Insights

  • Recent market crosscurrents have bolstered our Asset Allocation Committee’s view to maintain a slight underweight to stocks relative to bonds.
  • The global economic recovery shows signs of continuing, but key hurdles include fading fiscal and monetary stimulus and the potential for negative economic surprises.

Global equity markets have posted strong returns this year. However, the T. Rowe Price Asset Allocation Committee has maintained a slight underweight to stocks relative to bonds since March 2021, taking into account elevated stock valuations, moderating economic growth, and fading fiscal and monetary stimulus. These issues have become more pressing.

Indeed, the Citi Global Economic Surprise Index (Figure 1), which measures the degree to which economic data compare with estimates among economists, has declined since mid‑June 2021 and entered into negative territory in late August.

Economic Surprises Have Turned Negative

(Fig. 1) Citi Global Economic Surprise Index

Line graph showing negative trend of economic surprises

September 21, 2016, through September 21, 2021.
Source: Bloomberg Finance L.P.

The downward trend has been primarily driven by a few main factors. The global resurgence of the coronavirus pandemic attributed to the delta variant has dampened reopening plans and disrupted supply chains, while fading growth in China amid uncertainty over the country’s regulatory policy changes has also weighed on expectations. While we expect these pressures to potentially dissipate in the intermediate term, they are likely to remain sources of volatility in the near future.

Fiscal stimulus continues to support economies, though funding levels have decreased significantly since 2020 as economic activity has largely normalized. Further, substantial new fiscal spending in the U.S. faces legislative hurdles and is likely to be below previous estimates. Spending proposals on infrastructure and climate change are being debated, as are corporate tax rate increases to pay for them. Meanwhile, monetary stimulus is likely approaching a notable inflection point, with the U.S. Federal Reserve signaling intentions to begin tapering its asset purchase program. Historically, reduced liquidity has coincided with weaker equity market performance (Figure 2).

Fading Stimulus

(Fig. 2) Change in assets of the four largest central banks1 vs. equity market performance

Line graph showing change in assets versus equity performance

December 31, 2010, through August 31, 2021.
Past performance is not a reliable indicator of future performance.
Sources: Bloomberg Finance L.P. and MSCI. T. Rowe Price analysis using data from FactSet Research Systems Inc. All rights reserved. See Additional Disclosures.
The four largest central banks are U.S. Federal Reserve, European Central Bank, Bank of Japan, and Central Bank of China.

We believe that the global economy remains relatively strong, but our committee’s determination to retain a slight underweight to equities is based on our view that economic headwinds over the near term could cause volatility.


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.

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