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Global Asset Allocation Viewpoints

March 2025

Outlook

We are generally cautious as broadly resilient global growth and receding inflation trends could be at risk to increased policy uncertainty, particularly with the potential for escalating trade wars.
U.S. growth showing some signs of softening, while sentiment toward Europe and China improving on fiscal spending hopes, despite tariff threats. Other more directly impacted economies, notably Mexico and Canada, are at higher risk.
With monetary policy remaining broadly accommodative, disruptive trade policies could force more decisive action by central banks to support growth with the impacts on inflation uncertain.
Key risks to global markets include escalating trade wars’ impact on growth and reaccelerating inflation, central bank missteps, and geopolitical tensions.

Themes Driving Positioning

Dethroned

It has been a surprising start to the year with U.S. markets’ reign being challenged after two strong years of outperforming on uplifted sentiment toward Europe and China. Optimism for a resolution in the Russia-Ukraine war, ECB easing, talk of increased defense spending and hopes for less punitive tariffs have helped improve sentiment across Europe. Meanwhile Chinese markets accelerated, led by depressed tech names, following news out on Deepseek, an AI start-up company whose technology called into question U.S. dominance in the space. And while long-term structural issues linger and tariffs could pose downside risk to these markets, valuations remain compelling versus those in the U.S., particularly amid narrowing growth differentials. Against this backdrop, we are tilting our regional exposure to markets outside the U.S.

Performance data quoted represents past performance which is not a guarantee or a reliable indicator of future results.
Data as of 28 February 2025 unless otherwise noted.
Sources: Bloomberg L.P., Standard & Poor’s and MSCI. Please see Additional Disclosures for more information about this sourcing information.

A Means to an End?

Following the post-election “Trump Bump” where markets seemed to focus on potential impacts of pro-growth policies, including deregulation and lower taxes, things have quickly shifted as the focus has turned to trade and geopolitical policies. The on-and-off tariff threats have upended markets trying to weigh the impacts on growth and inflation. Geopolitical tensions surrounding the Ukraine-Russia war have also caused upheaval across Europe as they recalibrate U.S. support in the region. This comes at a fragile time when inflation was just coming into control and growth was still holding up. Recent data, however, shows growing concerns and softening economic data in the U.S., largely attributable to increased uncertainty around policy. Intended or not, prolonged uncertainty will begin to have real impacts on policymaker, corporate and consumer behavior leaving us more cautious near-term, and watching for opportunities amid expected higher volatility.

Performance data quoted represents past performance which is not a guarantee or a reliable indicator of future results.
Data as of 28 February 2025 unless otherwise noted.
Sources: Bloomberg L.P., Standard & Poor’s and MSCI. Please see Additional Disclosures for more information about this sourcing information.

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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. 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.

This information is not individualized to the needs of, nor is it specific to, any financial professional or client of the financial professional. Financial professionals are responsible for determining if investments are appropriate for their clients. 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.

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.

202503-4300034

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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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