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MIDYEAR 2024 INVESTMENT OUTLOOK: EQUITY AND FIXED INCOME MARKETS ADJUSTING TO ACCOMMODATE CENTRAL BANK POLICY EXPECTATIONS

Active Investing Appears Primed to Favor Shifting Market Conditions and Identify Pockets of Opportunity for Investors

BALTIMORE, June 20, 2024 /PRNewswire/ -- T. Rowe Price, a global investment management firm and a leader in retirement, released its outlook for global financial markets for the remainder of 2024. Underpinning the outlook for the next six months is the change in expectations for central bank policy. Given pricing on interest rate futures, there will likely be far fewer interest rate cuts from global central banks than seemed likely at the start of the year. Equity and fixed income markets are adjusting accordingly, noting the following key expectations for the balance of the year:

  • Broadening global growth in light of decreasing recession risk

  • Elevated potential for Fed surprises

  • Risk of reaccelerating inflation, driven in part by sticky services inflation

  • Increased opportunities in equities, specifically in value and potentially small-cap

  • A reduced liquidity preference in favor of equities and short-duration bonds

While there continues to be a place for both active and passive management in investor's portfolios, this challenging market environment, including higher rates, continued asset price dispersion and more volatile markets, supports conditions for active managers to outperform.

QUOTES

Nikolaj Schmidt, Chief International Economist

"The global economic outlook consensus has markedly changed over the last six months. While in late 2023 falling inflation supported expectations of brisk rate cuts, today we foresee a broadening of global growth, resilient inflation pressures, and limited easing from central banks."

"In the U.S., the Fed is more likely to surprise with fewer cuts rather than with more. We expect to see the Fed cutting 25 basis points (0.25%) at its December policy meeting, after the November elections are out of the way, and possibly once in the late summer. The outlook for Fed easing in 2025 is less clear, one or two rate reductions seems realistic."

Ken Orchard, Head of International Fixed Income

"While inflation is notoriously difficult to predict, it's clear that it isn't going anywhere. Last year we saw a decrease in global inflation due to goods disinflation; now services inflation is driving a renewed upward pressure. This is sticky, and needs to fall, but several factors would need to adjust, including wage pressures, fiscal spending, and energy prices. In this type of environment, investors may benefit from exposure to short duration credit – such as loans and ABS – Asian government bonds, and inflation protected bonds."

Peter Bates, Equity Portfolio Manager, International Equities

"In U.S. equities, we see increased opportunity for companies and sectors that have previously lagged. Performance within the 'Magnificent Seven' is beginning to diverge as of late May, and we see this trend continuing as artificial intelligence (AI) continues to play a larger role – as the benefits are unlikely to be evenly enjoyed by each company. Additionally, we are seeing the continuation of value stocks trading at a significant discount to growth stocks. If the Fed only makes a few cuts or does not cut at all, we believe the market conditions will be primed for stocks that should benefit from higher rates and inflation to perform better."

Tim Murray, Chief Capital Markets Strategist, MultiAsset Division

"As fears over a recession have receded, it's likely the current preference for liquidity will ease. The focus has shifted from recession risk to inflation risk, and investors are moving out of cash in favor of equities and short‑duration bonds. In the current environment, energy stocks may offer best hedge against inflation. Shorter‑term bonds also provide attractive yield levels and the potential for price appreciation if yields move lower."

ABOUT T. ROWE PRICE
Founded in 1937, T. Rowe Price (NASDAQ: TROW) helps people around the world achieve their long-term investment goals. As a large global asset management company known for investment excellence, retirement leadership, and independent proprietary research, the firm is built on a culture of integrity that puts client interests first. Investors rely on the award-winning firm for its retirement expertise and active management approach of equity, fixed income, alternatives, and multi-asset investment capabilities.

T. Rowe Price manages USD$1.54 trillion in assets under management as of May 31, 2024, and serves millions of clients globally. News and other updates can be found on Facebook, InstagramLinkedInXYouTube, and troweprice.com/newsroom.

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. It is not intended for distribution to retail investors in any jurisdiction.

T. Rowe Price Investment Services, Inc., distributor. T. Rowe Price Associates, Inc., investment adviser. T. Rowe Price Associates, Inc. and T. Rowe Price Investment Services, Inc. are affiliated companies.

© 2024 T. Rowe Price. All Rights Reserved. T. ROWE PRICE, INVEST WITH CONFIDENCE, and the Bighorn Sheep design are, collectively and/or apart, trademarks of T. Rowe Price Group, Inc.

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View original content:https://www.prnewswire.com/news-releases/midyear-2024-investment-outlook-equity-and-fixed-income-markets-adjusting-to-accommodate-central-bank-policy-expectations-302178065.html

SOURCE T. Rowe Price Associates, Inc.