The firm has struck a balanced stance on risk assets as stimulus and uncertainty shaped its latest global allocation outlook.
T. Rowe Price has maintained a balanced view on risk assets, saying fiscal stimulus and accommodative central bank policies continued to support global growth even as elevated valuations suggested “a lot of good news has been priced in”.
In its November Global Asset Allocation: The View from Australia report, the firm said US economic growth remained underpinned by ongoing fiscal spending and potential further easing from the Federal Reserve, although the outlook was clouded by “limited economic data and a lack of clarity around tariff impact”.
The report noted US equity markets had become “a bit more jittery” following a near 40 per cent rally from April lows, citing high valuations, scrutiny over AI spending, and concerns around debt financing for AI infrastructure.
These pressures were compounded by the US government shutdown, weakening private labour data and slumping consumer confidence.
“AI spending, however, has been the primary driver of economic growth, earnings, and market performance, offsetting weakness elsewhere in areas like housing, manufacturing, and the labour market,” T. Rowe Price wrote.
Additionally, the firm remained “broadly neutral across risk assets” given growing economic bifurcations.
The Federal Reserve’s most recent 25-basis-point rate cut and the end of quantitative tightening were widely expected, but dissent within the committee underscored rising uncertainty.
One member favoured a 50-basis-point cut while another opposed any reduction, prompting chair Jerome Powell to warn that a December cut was not assured amid the economic “fog”.
T. Rowe Price held a slight overweight to equities overall, saying a “goldilocks” backdrop and reasonable earnings expectations could provide a catalyst into year-end despite persistent inflation, tight credit spreads, and ongoing geopolitical and trade risks.
It remained underweight bonds globally, arguing that U.S. fiscal deficits and funding needs could keep upward pressure on long-term rates, while Australian bonds offered relatively better value due to a steep starting yield curve.
The firm moved to an underweight cash position, saying that while the Reserve Bank of Australia sounded more hawkish, monetary policy was “still likely to ease in the coming 6 months, a headwind for cash returns”.
Regionally, the report showed an underweight to Australian equities due to weak forecast earnings relative to global peers, elevated US valuations supported by strong fundamentals, and near-term upside potential in Europe driven by fiscal spending and accommodative policy.
Japan’s improved outlook and emerging markets’ benefit from easing trade tensions and capital flows from the US also supported overweight positions.
On currencies, the firm lowered its conviction on the Australian dollar as “the US dollar is getting bid”, though it still expected upside catalysts from narrowing interest rate differentials and commodity prices.
