T Rowe’s price remains cautious on stocks and signals inflation risks
One of the world’s largest investment firms claims to have a slightly negative view of the stock market, with moderate growth and central bank action factors behind that view.
T Rowe Price, the US asset management house overseeing $ 1.61 trillion in client money, remains “modestly” underweight stocks relative to bonds and cash; he is not attracted to equity valuations as growth and central bank stimuli are moderating.
The company said significant risks to global markets include high inflation, central bank missteps, subdued growth in China, supply chain disruption, increased regulatory pressures, higher taxes. and growing geopolitical concerns.
The update came from Thomas Poullaouec, Head of Multi-Asset Solutions, Asia-Pacific, at T Rowe Price.
“Global monetary policy should continue [a] path to tightening, but central banks are following different paths, with some, particularly in emerging markets, having already acted in response to higher inflation while others continue to hold their policy on hold pending further evidence. solid growth, ”he said.
“Higher rates, rising input costs linked to supply chain bottlenecks and potential tax increases could call into question the outlook for short-term profits,” he said. .
“Inflation is proving to be a little more persistent and higher than expected, putting pressure on some central banks around the world to act. Several central banks in emerging markets, such as Brazil and Mexico, began to hike rates over the summer to cope with rising prices and now some central banks in developed markets are also looking to act, ”he said. declared Poullaouec.
He noted that the Bank of England has signaled higher rates will arrive soon as inflation is expected to approach 4 percent, double its official target. He also pointed out that even though the Federal Reserve was planning to cut back on asset purchases, it remained committed to its current rate policy, reiterating that high inflation levels would be “transitory.” The European Central Bank has also warned against overreacting to inflation levels, keeping current policy in place.