T. Rowe Price has reduced its cash weighting down from a neutral to underweight in order to “add the proceeds to stocks”, it confirmed in its Global Asset Allocation: The View from Australia report for June 2025.
This comes as the firm lowered its equity allocation to an underweight from neutral in May, due to potential headwinds to growth from tariff and trade policies, while adding to cash which, at the time, shifted it to a neutral allocation.
According to Thomas Poullaouec, head of multi-asset solutions APAC at T. Rowe Price, and his team, the Reserve Bank of Australia’s (RBA) recent easing bias is “a headwind for cash returns”.
As such, the firm said it has “reduced the cash weighting to add the proceeds to stocks”.
Australian bonds remained in an overweight position due to the elevated risk environment, as well as the RBA’s easing bias and the “carry versus other developed markets”.
T. Rowe also maintained its position on global bonds considering the potential for upward pressure on US interest rates and the threat of tariffs on inflation.
The firm’s cautious outlook on equities was unchanged from the previous month, with Poullaouec and his team citing “extended valuations, optimistic earnings projections and [an] uncertain path on trade policy”.
T. Rowe Price continues to favour value-orientated sectors supported by reasonable valuations, deregulation and widening economic activity beyond AI infrastructure-driven spending.
Regionally, Poullaouec and his team stated they’ve observed “better opportunities outside of the US on more compelling valuations as well as improving sentiment supported by increased fiscal spending and accommodative central banks”.
Tariff concerns are dampening the US growth outlook as the clock ticks closer on to the deadline on the 90-day pause on reciprocal tariffs, while fiscal policy effects remain uncertain.
“Further exacerbating market unease has been the courts’ recent rulings on the legality of the tariffs,” the firm stated.
“With less than a month to go before the deadline, and seemingly much work left to be completed in securing deals with a large number of trading partners, markets may have gotten too complacent about the ability to pull off such a large feat.”
Other economies, including Europe and China, share growth concerns but have more monetary policy flexibility and are using fiscal measures to counteract.
Meanwhile, Australia's economic momentum appears to be peaking, though monetary and fiscal support may help cushion the slowdown, according to T. Rowe Price.
US long-term yields have risen despite easing inflation and growth concerns, driven by focus on the growing deficit, Moody’s downgrade, reduced foreign demand and tariff-related inflation fears.
While rates haven’t yet significantly affected the economy or equities, further increases could strain areas like housing and corporate debt, according to the firm.
“Against this backdrop, we remain cautious on equities and longer duration, as we could be closer to a tipping point on rates with no let-up in fiscal spending or trade relief in sight.”
