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Global Asset Allocation Viewpoints

The View from Canada

April 2025

Outlook

Increased trade policy angst has threatened the resiliency of global growth while stoking fears of inflation, warranting a more cautious stance.
U.S. growth expectations slowing under weight of uncertainty, while sentiment in Europe and China improving on policy support hopes, despite tariff threats. Canada and Mexico growth remain at risk, although tariffs less punitive with CUSMA¹ exemption.
With monetary policy remaining broadly accommodative, disruptive trade policies could force central banks to make uneasy choices to support growth despite threats of higher inflation, which is most pronounced in the U.S.
Key risks to global markets include escalating trade wars’ impact on growth and reaccelerating inflation, central bank missteps, and geopolitical tensions.

Themes Driving Positioning

Cold Feet

Almost every measure of consumer and business sentiment, aka “soft data,” has notably deteriorated amid rising uncertainty around trade policy. While sentiment usually lags “hard data,” like employment and spending, today’s soft data is signaling a far more dire outlook than the hard data is implying. The real concern is if businesses and consumers continue to face this level of uncertainty for a prolonged period. If this is the case, they are likely to have cold feet when it comes to investment, purchasing, and hiring decisions. With trade disputes lasting for nearly a year and a half during President Trump’s first term, the sentiment could be right this time around, foreshadowing a deeper slowdown in the economy. Given the heightened risk, we continue to lower our equity exposure.

Performance data quoted represents past performance which is not a guarantee or a reliable indicator of future results.
Data as of 31 March 2025 unless otherwise noted. Sources: Bloomberg L.P., Standard & Poor’s and MSCI. Please see Additional Disclosures for more information about this sourcing information.
¹ CUSMA: Canada-United-States-Mexico-Agreement.

European Vacation?

For most investors, the outperformance in European equities this year has been a big surprise. The start of the year saw Europe facing a bleak economic backdrop, lingering war between Ukraine and Russia, political discord and threats of U.S. tariffs on the horizon. This follows decades of turmoil, including political instability, debt crisis and Brexit, leaving most investors skeptical in allocating to the continent. The recent outperformance, however, comes amid notable policy shifts, including increased fiscal spending from Germany on defense and infrastructure and a more unified commitment from leaders across the region on improving competitiveness. Despite tariff uncertainty, sentiment toward the region has quickly shifted and flows are following. We see this as more than a short vacation, and are adding to European equities, on upside potential to capex spending and lending.

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ADDITIONAL DISCLOSURES

S&P and MSCI do not accept any liability for any errors or omissions in the indexes or data, and hereby expressly disclaim all warranties of originality, accuracy, completeness, timeliness, merchantability, and fitness for a particular purpose. No party may rely on any indexes or data contained in this communication. Visit https://www.troweprice.com/en/us/market-datadisclosures for additional legal notices & disclaimers.

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. Performance data quoted represents past performance which is not a guarantee or a reliable indicator of future results. 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.

Canada - Issued in Canada by T. Rowe Price (Canada), Inc. T. Rowe Price (Canada), Inc.’s investment management services are only available to non-individual Accredited Investors and non-individual Permitted Clients as defined under National Instrument 45-106 and National Instrument 31-103, respectively. T. Rowe Price (Canada), Inc. enters into written delegation agreements with affiliates to provide investment management services.

Residents of Quebec may request a French translation of this document. Please contact CanadaTranslationRequests@troweprice.com. Les résidents du Québec peuvent demander une traduction française de ce document. S'il vous plaît contactez CanadaTranslationRequests@troweprice.com.

© 2025 T. Rowe Price. All Rights Reserved. T. ROWE PRICE, INVEST WITH CONFIDENCE, the Bighorn Sheep design, and related indicators (https://www.troweprice.com/en/intellectual-property) are trademarks of T. Rowe Price Group, Inc. All other trademarks are the property of their respective owners.

202504-4396701

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