ASSET ALLOCATION FOR TODAY AND TOMORROW

Transcription

1 Investment Strategy ASSET ALLOCATION FOR TODAY AND TOMORROW Wyatt Lee, CFA, Portfolio Manager, Asset Allocation Jennifer O Hara Martin, Portfolio Specialist, U.S. Equity Jeff DeVack, CFA, Portfolio Specialist, Fixed Income Chuck Knudsen, CFA, Portfolio Specialist, International and Emerging Equity May 18, 2016

2 Agenda Solving for client needs Uncovering opportunities Adjusting portfolio weightings 2

3 Solving for Clients Goals and Needs 1990s 2000s 2010s 1990 Spectrum Growth and Spectrum Income Funds 1991 Balanced Fund 1994 Personal Strategy Funds 2001 College Savings Plan 2002 Retirement Funds 2010 Real Assets Fund 2013 Global Allocation Fund 2013 Target Funds 3

4 A Layered Approach to Asset Allocation Solutions Research 4

5 A Layered Approach to Asset Allocation Solutions As of December 31, United Kingdom United States Hong Kong 7 Japan Fixed Income Professionals Equity Professionals Singapore 9 9 Australia 71 portfolio managers, 4 portfolio managers/analysts, 14 associate portfolio managers, 10 regional portfolio managers, 13 sector portfolio managers, 141 research analysts/credit analysts, 33 quantitative analysts, 16 asset allocation analysts, 45 associate analysts, 27 portfolio specialists/generalists, 6 specialty analysts, 50 traders, 13 trading assistants, 2 economists, 28 portfolio modeling associates, 3 solutions associates, and 20 management associates. 5

6 A Layered Approach to Asset Allocation Solutions Research 6

7 commodities China inflation recession interest rates currencies leverage GDP growth Fed politics regulation valuations dividend yield margins oil crisis revenues quantitative easing earnings

8 Year-Over-Year Percent Change (%) China s Economy A Slowing Path January 2005 September 2015 CHINA: REAL GDP GROWTH YEAR-OVER-YEAR Source: FactSet. 8

9 China s Growth is Critical to the Global Economy PROJECTED CONTRIBUTION TO GLOBAL GDP GROWTH China 28% Source: IMF World Economic Outlook. 9

10 Volume trading below 0% Over 30% of the World s Government Bonds are Carrying a Negative Yield As of March 31, 2016 GOVERNMENT BONDS TRADING BELOW 0% YIELD 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Spain Italy Belgium Denmark Sweden France Austria Finland Netherlands Germany Japan Switzerland Sources: Bloomberg Finance LP and DB Global Markets Research. 10

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12 415 million millennials in China!

13 Parts of China s Economy Remain Vibrant As of December 31, 2015 YEAR-OVER-YEAR GROWTH IN CHINA S CONSUMPTION 44% 35% 30% 17% 6% Cosmetics sales New passenger car sales units Movie box office revenue Online retail sales International air passenger traffic* Sources: Goldman Sachs, NBS, iresearch, and CEIC. *Data point as of November 30,

14 Online Games Tencent: Finding Success as a Full-Service Portal Social Network Online Advertising million QQ instant messaging users 1 #1 in news, video, and multiple online games Over 100 million users have linked their bank cards to mobile payment Media Payments 1 Monthly active user accounts as of June Source: Tencent Q Investor Presentation. This example is for illustrative purposes only. The above security was included in a number of our asset allocation portfolios as of 3/31/

15 U.S. Horizontal Oil Has Changed the Global Oil Market 7% The United States makes up only of the world s land mass but has contributed over 50% of the global production of oil in the last five years Sources: BP Statistical Review and T. Rowe Price. As of Oct

16 Par Amount ($ Billions) Dramatically Lower Commodity Prices are Driving Debt Downgrades As of March 31, 2016 HIGH YIELD FALLEN ANGEL ANNUAL VOLUME February Projected 2016 Source: J.P. Morgan. 16

17 Net Oil Exports as % of GDP Oil Price Decline Helps More Countries Than It Hurts As of December 31, % Net Exporters 15% 10% 5% 0% -5% -10% -15% -20% Net Importers Source: Renaissance Capital. 17

18 Our Views Influence Current Weightings ASSET ALLOCATION EQUITIES FIXED INCOME EQUITIES FIXED INCOME U.S. INT L. U.S. INVESTMENT GRADE HIGH YIELD DEVELOPED EMERGING U.S. INVESTMENT GRADE EMERGING MARKETS GLOBAL EQUITY REAL ASSETS U.S. INVESTMENT GRADE NONDOLLAR U.S. LARGE-CAP U.S. SMALL-CAP U.S. VALUE U.S. GROWTH 18

19 1 2 3 Solving for client needs Uncovering opportunities Adjusting portfolio weightings 19

20 Q&A

21 THANK YOU Call to request a prospectus, which includes investment objectives, risks, fees, expenses, and other information that you should read and consider carefully before investing. All trademarks are the property of their respective owners. The use of any third-party content is not a sponsorship or endorsement of T. Rowe Price. This material is provided for informational purposes only and is not intended to be investment advice or a recommendation to take any particular investment action. The views contained herein are as of May 18, 2016, and may have changed since that time. All charts and tables are shown for illustrative purposes only. Past performance cannot guarantee future results. T. Rowe Price Investment Services, Inc., Distributor. CY04BWU2I 2016-AX-18603