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2024 Global Market Outlook Midyear Update
Shifting market conditions will favour active management
Active investing
The investment environment is changing. The post‑GFC era of low rates and abundant liquidity is being replaced by one of higher rates, greater divergence of returns, and more volatile markets. We believe this period of transition will continue in the second half of 2024 and underpin conditions for active managers to outperform.
Challenging market conditions will require investors to be more valuation‑sensitive than in recent times, when a rising tide lifted all boats. Traditional skills, such as identifying stock drivers and idiosyncratic risk, will continue to be essential, but investors will need to take into account wider macroeconomic, social, and geopolitical factors along with company fundamentals.
Active managers have performed well following periods of index concentration
Active managers tend to go beyond benchmarks and into factors that can be cyclical, such as small-cap and value stocks—both of which we believe may perform well in the period ahead. Top performing active managers have also historically performed well following periods of heavy index concentration—and markets recently have been concentrated to an unprecedented degree.2 Although it is difficult to predict when the current period of index concentration will recede meaningfully, there are already signs that the dominance of the Magnificent Seven is beginning to fade.
The end of the period of very low rates will also, we believe, lead to greater dispersion and heightened volatility in bond markets. Active investing can help with duration management, as well as managing country selection, curve positioning, and security selection.
These developments do not mean we expect passive investing to undergo a major retreat. However, we believe that active management will be the better option for the period ahead, as it can offer better outcomes during periods of greater volatility and dispersion.
2 Based on eVestment U.S. large-cap manager performance and S&P 500 Index concentration analyzed from September 30, 1989 to December 31, 2023. Past performance is not a reliable indicator of future performance. As of April 30, 2024, the S&P 500 Index and Russell 1000 Growth Index both registered their highest levels of concentration in 20 years, as measured by the combined weighting of the 10 largest stocks in each index.
Nikolaj Schmidt,
Chief Global Economist
Ken Orchard,
Head of International Fixed Income
Peter Bates, CFA
Portfolio Manager, Global Equities
Tim Murray, CFA
Capital Markets Strategist,
Multi‑Asset Division
Global Market Outlook Midyear Update insights
2024 Global Market Outlook Midyear Update
How central bank policy could impact your portfolio
Tactical views
Expectations of central bank policy have shifted since the beginning of the year. What factors will shape the path of rate cuts in the second half of 2024?
Economy
Broadening global growth, resurgent inflation define outlook
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Active investing may have higher costs than passive investing and may underperform the broad market or passive peers with similar objectives.
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 any historical performance. The information presented herein is shown for illustrative, informational purposes only. Any 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. Where securities are mentioned, the specific securities identified and described are for informational purposes only and do not represent recommendations.
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