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T. Rowe Price US Equity Event
Andaz, 40 Liverpool Street, London
18 April, 2024
Outlook for US Equities
Key Takeaways
- The increasingly concentrated nature of US benchmarks in recent years has been particularly challenging for investors in US equities.
- However, we anticipate an easing of market concentration, as S&P 500 earnings improve and broaden out to the wider market during the second half of 2024.
- Small and mid-cap US stocks look well positioned in the current environment. Relative valuations are well below long-term average levels, while history shows that smaller companies tend to lead the market once the rate hiking cycle ends.
Download our US Equity fund documents
US Growth
Key Takeaways
- US equity market styles have diverged over the past 18 months, with growth significantly outperforming value and large cap outperforming smaller companies.
- The performance of the magnificent 7 stocks has been hugely influential, significantly impacting respective index returns, and skewing broad US market valuations.
- Moving forward, we expect the influence of the magnificent 7 to lessen, as S&P 500 earnings growth improves and continue to broaden across the wider market during 2024.
Download our growth fund documents
The US economy has defied recessionary fears. What now?
An economic “soft landing” is undoubtedly positive, but there are reasons to be cautious
By Justin White
Risks - The following risks are materially relevant to the fund (refer to prospectus for further details): Equities, Geographic concentration, Hedging, Investment fund, Issuer concentration, Management, ESG, Market, Operational, Sector concentration, Small/mid Cap, Style
US Large Cap Value
Key Takeaways
- The growth premium relative to value in the US remains well above the long-term average. This represents a potentially favourable starting point for value investors.
- The current environment looks supportive of value investing, in our view, particularly given the stretched nature of growth valuations, and low expectations for value stocks
- Narrow markets also create opportunities, and we are finding a broad range of value investments in areas including:
- Underappreciated artificial intelligence beneficiaries
- Regional banks with a mid-west focus
- Oil companies and services
- Industrials on the right side of change
Risks - The following risks are materially relevant to the fund (refer to prospectus for further details): Equities, ESG, Geographic concentration, Investment fund, Management, Market, Operational, Small/mid cap, Style.
US Structured Research
Key Takeaways
- The US Structured Research Strategy (SRS) aims to provide clients with a portfolio with the same overall characteristics as the S&P 500, while delivering a higher level of returns.
- SRS has a long history delivering returns across a wide range of market environments, including both growth and value environments, and when markets are rising as well as falling.
- The power of compounding – modest, but consistent and repeatable excess returns – is the advantage that SRS offers versus passive investing, resulting in better risk-adjusted performance.
Download our US Structured Research fund document
Related link
Risks - The following risks are materially relevant to the fund (refer to prospectus for further details): Equities, ESG, Geographic concentration, Investment fund, Management, Market, Operational, Small/mid cap.
US Smaller Companies
Key Takeaways
- Sentiment towards US smaller companies remains subdued as investors continue to focus on the negatives, including stubborn inflation causing potential interest rate cuts to be delayed.
- However, the current environment for smaller companies looks encouraging – inflation is well off recent highs, consumer and business sentiment is improving, and government initiatives/reshoring trends represent potentially significant tailwinds.
- US smaller company valuations are currently at attractive relative levels. Historically, investors in smaller companies have benefited by putting money to work during periods when small cap valuations have fallen below long-term average levels.
US small-cap stocks look like a potentially big opportunity
Six key factors point to an encouraging outlook for US smaller companies
By Matt Mahon & Curt Organt
Risks - The following risks are materially relevant to the fund (refer to prospectus for further details): Equities, ESG, Geographic concentration, Investment fund, Management, Market, Operational, Small/mid cap.
General Fund Risks
To be read in conjunction with the fund specific risks above.
Capital risk – the value of your investment will vary and is not guaranteed. It will be affected by changes in the exchange rate between the base currency of the portfolio and the currency in which you subscribed, if different.
Equity risk – in general, equities involve higher risks than bonds or money market instruments.
Geographic concentration risk – to the extent that a portfolio invests a large portion of its assets in a particular geographic area, its performance will be more strongly affected by events within that area.
Hedging risk – a portfolio's attempts to reduce or eliminate certain risks through hedging may not work as intended.
Investment portfolio risk – investing in portfolios involves certain risks an investor would not face if investing in markets directly.
Management risk – the investment manager or its designees may at times find their obligations to a portfolio to be in conflict with their obligations to other investment portfolios they manage (although in such cases, all portfolios will be dealt with equitably).
Operational risk – operational failures could lead to disruptions of portfolio operations or financial losses.