markets & economy | january 5, 2023
2023 Global Market Outlook Webinar: The Need for Agility
Watch as our senior investment leaders share insights into what could lie in store for investors in 2023.
Economic conditions are forcing central banks into a delicate balancing act with inflation, interest rates, public sentiment, and financial stability. Can markets pull through, or is the worst still to come?
Our firm is taking a careful, contrarian approach to equity markets. Find out why.
2022 was the worst year on record for bonds. But with sector yields approaching their highest levels in decades, fixed income investors in the know have cause for optimism.
A deglobalizing world may require investors to rethink their playbooks. Allow us to share ours with you. We’ll examine four key themes currently shaping markets and provide insights into potential investment opportunities and risks in 2023.
Hello, and thank you for joining us for T. Rowe Price's 2023 Global Market Outlook: The Need for Agility.
2022 was characterized by elevated and persistent inflation that prompted central banks to hike at the fastest pace in a decade.
As we head into 2023, this will be the year these economic effects are felt, with recession risks rising across the globe. The good news is that valuations across most major asset classes appear more attractive today. And while elevated geopolitical risks and changing market structures mean investors should be prepared for higher volatility, agility can be a source of opportunity amid dislocation.
In today's conversation, we will explore key themes we think could shape market performance. And importantly, what this could mean for your portfolios. Our four overarching topics are: an economic balancing act, leaning against the wind, the return of yield, and finally, deglobalization in a connected world.
My name is Ritu Vohora, and I'm an investment specialist covering global capital markets. My role is to provide our clients with a broad perspective into the views of our multi-asset, equity, and fixed income investors at T. Rowe Price.
I'm delighted to be joined by three fantastic speakers. With me in the studio today we have Justin Thompson, who is head of international equity and chief investment officer. He has 31 years of equity investment experience, 24 of which has been with T. Rowe Price. Welcome, Justin.
And joining us from Baltimore, we have Andy McCormick, who is head of Global Fixed Income and CIO. Andy has 39 years of investment experience, and he has been with T. Rowe Price for 14 years, beginning as a portfolio manager in the fixed income division. Welcome, Andy.
And last, but definitely not least, we have Sebastien Page, who is Head of Global Multi-Asset and CIO. He has 24 years of investment experience, seven of which have been with T. Rowe Price. Sebastien is also the author of an asset allocation book called Beyond Diversification.
So thank you all for joining us today.
Now to kick off with the first theme, an economic balancing act. The current economic environment is forcing the Federal Reserve and other global central banks to pursue a delicate balancing act with inflation, interest rates, recession risks and financial stability. Arguably, the global economy's resilience so far, has allowed central banks to continue to tighten policy, despite some leading indicators flirting with recession.
All investments involve risk, including possible loss of principal. Past performance is not a reliable indicator of future performance.
Small-cap stocks have generally been more volatile in price than large-cap stocks.
International investments can be riskier than U.S. investments due to the adverse effects of currency exchange rates, differences in market structure and liquidity, as well as specific country, regional, and economic developments. These risks are generally greater for investments in emerging markets.
Fixed income investing includes interest rate risk and credit risk. When interest rates rise, bond values generally fall. Investments in high yield bonds involve greater risk of price volatility, illiquidity, and default than higher-rated debt.
Investments in bank loans may at times become difficult to value and highly illiquid; they are subject to credit risk, such as nonpayment of principal or interest, and risks of bankruptcy and insolvency.
The value approach to investing carries the risk that the market will not recognize a security's intrinsic value for a long time or that a stock judged to be undervalued may actually be appropriately priced. This investing style may become out of favor, which may result in periods of underperformance.
Alternative investments are speculative investments that typically involve aggressive investment strategies. In addition, alternative investments may be illiquid, difficult to value, and not subject to the same regulatory requirements as traditional investments. These factors may increase an investment’s liquidity risks and risk of loss.
Deflationary conditions (when inflation is negative) could cause Treasury inflation-protected securities' (TIPS) principal and income to decrease in value.
A business development company (“BDC”) is a company that expects to invest at least 80% of its total assets (net assets plus borrowings for investment purposes) in private credit investments (bonds and other credit investments that are issued in private offerings or issued by private companies). This investment involves a high degree of risk. An investor should purchase these securities only if they can afford the complete loss of the investment.
Real assets include any assets that have physical properties, such as energy and natural resources, real estate, basic materials, equipment, utilities and infrastructure, and commodities. Investments in certain industries that involve activities related to energy, natural resources, real estate, commodities, infrastructure, and other real assets are more susceptible to adverse developments affecting one or more of these industries than a more broadly diversified investment would be and may perform poorly during a downturn in any of those industries.
Changes in the tax laws, overbuilding, environmental issues, the quality of property management in the case of real estate investment trusts (REITs), and other factors could hurt investments in the real estate industry.
Diversification cannot assure a profit or protect against loss in a declining market.
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