The multi-asset team at T. Rowe Price (TRP) has shifted its asset class positioning to navigate heightened uncertainty.
Thomas Poullaouec, head of multi-asset solutions Apac, at TRP and his team are underweight equities and overweight cash given potential headwinds to growth from tariffs and trade.
“Heightened policy uncertainty and reduced capex/earnings expectation may push the stock market down further,” said Poullaouec (main picture), in a note today.
Within equities, he continues to favour value-oriented sectors, which he believes are supported by more reasonable valuations and should benefit from a continued broadening away from US large-cap growth.
Among regions, Poullaouec sees better opportunities outside of the US, particularly in Europe, on more compelling valuations as well as “improving sentiment supported by increased fiscal spending and accommodative central banks”.
In contrast, his team has reduced its Asia ex-Japan allocation to neutral because “the region has been targeted more aggressively by the US reciprocal tariffs with no clear resolution in sight”.
Turning to bonds, Poullaouec, in general, maintains an underweight position given the potential for upward pressure on US interest rates because of possible increased supply to accommodate US fiscal policy.
In addition, he has increased inflation sensitivity and cut back US duration by increasing positions of short-term Treasury Inflation-Protected Securities to overweight and increasing hedged global investment grade bond exposure.
His team has also trimmed exposure to spread sectors. Their allocation to high yield and emerging markets US dollar sovereign bonds is neutral.
“While fundamentals remain broadly supportive, spreads could be vulnerable to disruptions associated with trade policy,” Poullaouec said.
Meanwhile, as inflation risk increases, he has raised real assets equities positioning to overweight to better protect the portfolio against inflation shocks.
Finally, the multi-asset team remains overweight cash, “as it still provides attractive yields and liquidity”.
