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.

59:39

 

Key Insights

  • 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.

Thank you.

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.

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Investment Risks

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.

Additional Disclosures

CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.

Bloomberg PORT – 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.

FactSet – Financial data and analytics provider FactSet. Copyright © 2022 FactSet. All Rights Reserved.

Haver Analytics – (Ministry of Health, Labour & Welfare, Statistical Office of the European Communities, Bureau of Labor Statistics, US Bureau of Labor Statistics, US Bureau of Economic Analysis, European Central Bank, Standard & Poor’s Bureau of Economic Analysis, Federal Reserve Board, Tax Policy Center and Citizens for Tax Justice, China National Bureau of Statistics, Bank of Korea)/Haver.

J.P. Morgan Chase – Information has been obtained from sources believed to be reliable, but J.P. Morgan does not warrant its completeness or accuracy. The index is used with permission. The Index may not be copied, used, or distributed without J.P. Morgan’s prior written approval. Copyright © 2022, J.P. Morgan Chase & Co. All rights reserved.

MSCI – MSCI and its affiliates and third-party sources and providers (collectively, “MSCI”) makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed, or produced by MSCI. Historical MSCI data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. None of the MSCI data is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such.

S&P – Copyright © 2022, S&P Global Market Intelligence (and its affiliates, as applicable). Reproduction of (S&P 500 Index) in any form is prohibited except with the prior written permission of S&P Global Market Intelligence (“S&P”). None of S&P, its affiliates or their suppliers guarantee the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions, regardless of the cause or for the results obtained from the use of such information. In no event shall S&P, its affiliates or any of their suppliers be liable for any damages, costs, expenses, legal fees, or losses (including lost income or lost profit and opportunity costs) in connection with any use of S&P information.

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.

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.

The specific securities identified and described are for illustrative purposes only and do not represent all of the securities purchased, sold, or recommended by T. Rowe Price, and no assumptions should be made that investments in the securities identified and discussed were or will be profitable.

202212-2643885

 

Next Steps

  • Discover the future we see for financial markets and how we’re investing to prepare for it in our 2023 Global Market Outlook Insights.

  • Contact a Financial Consultant at 1-800-401-1819.

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