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2024 Global Market Outlook Midyear Update

How central bank policy could impact your portfolios


At midyear, expectations for rate cuts have been pushed out further, with far fewer anticipated, and markets have repriced accordingly. We anticipate growth in the global economy—however, while the U.S. economy remains strong, leading indicators suggest that the narrative of U.S. exceptionalism may fade. We see continued market broadening, with select equity and fixed income opportunities. Most importantly, the ongoing transition from the low rate post-global financial crisis environment to one characterized by higher interest rates may provide favorable conditions for active managers to outperform. 

Catch the most important takeaways from the 2024 Global Market Outlook Midyear Update in about two minutes with Ritu Vohora.

Oak trees in a forest

Higher interest rates for longer has become the consensus

Expectations of central bank policy have shifted since the beginning of the year—and the path of monetary easing by the world’s rate setters remain far from certain. We explore the factors shaping that path for the Fed and other key central banks in the second half of the year.

Container Ship in port

Key insights

  • We anticipate a broadening of global growth in the second half of the year as the narrative of U.S. exceptionalism finally starts to abate.
  • There will likely be a broadening of U.S. equity performance to include companies and sectors that have lagged, as well as attractive opportunities in international markets.
  • Investors seeking to move out of cash may find attractive opportunities in commodity-oriented stocks and short-term bonds.

Watch our Global Market Outlook Midyear Update now

Tactical allocation views

The tactical allocation views are prepared by the T. Rowe Price Multi-Asset Division and informed by a subjective assessment of the relative attractiveness of asset classes and subclasses over a 6- to 18-month horizon.

Tactical Allocation Legend

Asset Classes

Over guage

Stocks

Earnings continue to strengthen, but face elevated expectations. Potential for broader market participation as economic growth improves, commodity prices increase, and consumer spending remains resilient.

Under guage

Bonds

Yields remain attractive but volatility could persist due to global divergence in growth, inflation, and central bank expectations. Credit fundamentals remain supportive; however, spreads remain tight.
 

Over guage

Cash

Continues to offer attractive yields as the yield curve remains inverted, and continues to offer liquidity should market opportunities arise.

For informational purposes only. This material is not intended to be investment advice or a recommendation to take any particular investment action. Actual future outcomes may differ materially from forward-looking statements made.

Equity Regions

Neutral Gauge

U.S.

Earnings expectations improving. Economic activity resilient. Valuations may limit upside.

Neutral Gauge

Global Ex-U.S.

Valuations attractive on a relative basis. European equity outlook improving. Chinese growth appears to have stabilized.

Under guage

Europe

Inflation had been steadily declining but is showing signs of bottoming. Economic growth remains weak.

Over guage

Japan

Economy welcomes inflation after decades fighting deflation. Corporate governance continues to gradually improve.

Over guage

Emerging Markets

Valuations attractive. Monetary policy easing could provide support. Chinese equities finding some footing, but structurally challenged.

Style and Market Capitalization

Under guage

U.S. Growth vs. Value*

Improving economic outlook and broadening of equity market performance could be supportive for value.

Under guage

Global Ex-U.S. Growth vs. Value*

Value stocks cheap and could benefit if recession concerns fade. Growth stocks challenged by consumer weakness in China and Europe.

Neutral Gauge

U.S. Small vs. Large-Cap*

Small‑caps offer attractive relative valuations but are challenged by higher‑for‑longer interest rates.

Over guage

Global Ex-U.S. Small vs. Large-Cap*

Small‑caps offer very reasonable valuations against a muted global growth profile. Could benefit from improvement in economic growth.

Inflation Sensitive

Over guage

Real Assets Equities

Commodity‑related equities are cheap and offer an attractive hedge to stickier inflation.

* For pairwise decisions in style and market capitalization, positioning pointed represents in the first asset class relative to the second asset class.

The asset classes across the equity and fixed income markets shown are represented in our multi-asset portfolios. Certain style and market capitalization asset classes are represented as pairwise decisions as part of our tactical asset allocation framework.

For informational purposes only. This material is not intended to be investment advice or a recommendation to take any particular investment action. Actual future outcomes may differ materially from forward-looking statements made.

Under guage

U.S. Investment Grade (IG)

Yields broadly attractive. Credit fundamentals and technical backdrop supportive. But yields have upside risk and credit spreads* are tight.

Neutral Gauge

Developed Ex-U.S. IG (Hedged)

Global central banks cautiously eyeing rate cuts. Yields look attractive on a USD‑hedged basis.

Under guage

U.S. Treasury Long

Longer term yields biased higher due to increased supply, resilient growth, and stickier inflation.

Over guage

Inflation Linked

Sector offers a hedge should inflation settle at, or move higher, than current levels.

Over guage

Global High Yield

Attractive absolute yield levels supportive, but tight spreads may reflect a too optimistic backdrop.

Over guage

Floating Rate Loans

Yields could remain elevated on less aggressive Fed cut expectations. Spreads attractive, although default rates expected to rise.

Over guage

Emerging Market (EM) Dollar Sovereigns

Yields modestly attractive. Central banks easing cycles and moderating inflation may benefit EM bonds.

Over guage

EM Local Currency

Central bank easing and lower inflation could be tailwinds, but a higher‑for‑longer Fed could sustain dollar strength.

* Credit spreads measure the additional yield that investors demand for holding a bond with credit risk over a similar-maturity, high-quality government security.

The asset classes across the equity and fixed income markets shown are represented in our multi-asset portfolios. Certain style and market capitalization asset classes are represented as pairwise decisions as part of our tactical asset allocation framework.

For informational purposes only. This material is not intended to be investment advice or a recommendation to take any particular investment action. Actual future outcomes may differ materially from forward-looking statements made.

Important Information

This material is provided for informational purposes only and is not intended to be investment advice or a recommendation to take any particular investment action.

The views contained herein are those of the authors as of June 2024 and are subject to change without notice; these views may differ from those of other T. Rowe Price associates.

This information is not intended to reflect a current or past recommendation concerning investments, investment strategies, or account types, advice of any kind, or a solicitation of an offer to buy or sell any securities or investment services. The opinions and commentary provided do not take into account the investment objectives or financial situation of any particular investor or class of investor. Please consider your own circumstances before making an investment decision.

T. Rowe Price cautions that economic estimates and forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time. Actual outcomes could differ materially from those anticipated in estimates and forward-looking statements, and future results could differ materially from historical performance. The information presented herein is shown for illustrative, informational purposes only. Forecasts are based on subjective estimates about market environments that may never occur. The historical data used as a basis for this analysis are based on information gathered by T. Rowe Price and from third-party sources and have not been independently verified. Forward-looking statements speak only as of the date they are made, and T. Rowe Price assumes no duty to and does not undertake to update forward-looking statements.

Information contained herein is based upon sources we consider to be reliable; we do not, however, guarantee its accuracy.

Investment Risks:

Active investing may have higher costs than passive investing and may underperform the broad market or passive peers with similar objectives. Each persons investing situation and circumstances differ. Investors should take all considerations into account before investing.

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. The risks of international investing are heightened for investments in emerging market and frontier market countries. Emerging and frontier market countries tend to have economic structures that are less diverse and mature, and political systems that are less stable, than those of developed market countries.

Commodities are subject to increased risks such as higher price volatility, geopolitical and other risks. Commodity prices can be subject to extreme volatility and significant price swings.

Derivatives may be riskier or more volatile than other types of investments because they are generally more sensitive to changes in market or economic conditions; risks include currency risk, leverage risk, liquidity risk, index risk, pricing risk, and counterparty risk.

Real estate is affected by general economic conditions. When growth is slowing, demand for property decreases and prices may decline.

TIPS In periods of no or low inflation, other types of bonds, such as US Treasury Bonds, may perform better than Treasury Inflation Protected Securities (TIPS).

Investing in technology stocks entails specific risks, including the potential for wide variations in performance and usually wide price swings, up and down.

Technology companies can be affected by, among other things, intense competition, government regulation, earnings disappointments, dependency on patent protection and rapid obsolescence of products and services due to technological innovations or changing consumer preferences.

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.

Small‑cap stocks have generally been more volatile in price than the large‑cap stocks.

Diversification cannot assure a profit or protect against loss in a declining market.

Because of the cyclical nature of natural resource companies, their stock prices and rates of earnings growth may follow an irregular path.

Fixed‑income securities are subject to credit risk, liquidity risk, call risk, and interest‑rate risk. As interest rates rise, bond prices generally fall. Short duration bonds have more risk than cash/cash equivalents such as money markets. Equities have higher risk and are subject to possible loss of principal.

Investments in high‑yield bonds involve greater risk of price volatility, illiquidity, and default than higher‑rated debt securities. 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.

Past performance is not a reliable indicator of future performance. All investments are subject to market risk, including the possible loss of principal. Actual future outcomes may differ materially from any estimates and forward-looking statements made. All charts and tables are shown for illustrative purposes only.

T. Rowe Price Investment Services, Inc.

202407-3660677

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