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Global Asset Allocation Viewpoints

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.
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.

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

Source: T. Rowe Price. Unless otherwise stated, all market data are sourced from FactSet. Copyright 2025 FactSet. All Rights Reserved.
These are subject to change without further notice. Figures may not total due to rounding.
Neutral equity portfolio weights are representative of a U.S.-biased portfolio with a 70% U.S. and 30% international allocation; includes allocation to real assets equities. Core fixed income allocation is representative of a U.S.-biased portfolio with 55% allocation to U.S. investment grade. 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. 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.

This information is not intended to reflect a current or past recommendation concerning investments, investment strategies, or account types, advice of any kind, or a solicitation of an offer to buy or sell any securities or investment services. The opinions and commentary provided do not take into account the investment objectives or financial situation of any particular investor or class of investor. Please consider your own circumstances before making an investment decision.

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.

Risks: All investments are subject to risk, including possible loss of principal. Fixed-income securities are subject to credit risk, liquidity risk, call risk, and interest- rate risk. As interest rates rise, bond prices generally fall. Diversification does not assure a profit or protect against a loss in a declining market.

USA: T. Rowe Price Investment Services, Inc., and T. Rowe Price Associates, Inc. © 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.

202504-4386122

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T. Rowe Price ("TRP") claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. T. Rowe Price has been independently verified for the 27-year period ended June 30, 2023, by KPMG LLP. The verification report is available upon request. A firm that claims compliance with the GIPS standards must establish policies and procedures for complying with all the applicable requirements of the GIPS standards. Verification provides assurance on whether the firm’s policies and procedures related to composite and pooled fund maintenance, as well as the calculation, presentation, and distribution of performance, have been designed in compliance with the GIPS standards and have been implemented on a firm-wide basis. Verification does not provide assurance on the accuracy of any specific performance report.

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