Global Asset Allocation: The View From Australia

Global Asset Allocation: The View From Australia
Global Asset Allocation Viewpoints and Investment Environment by T. Rowe Price Australia Investment Committee, as at 31 January 2024.


  • Global growth expectations have stabilized, near the same levels as last year, with disinflation gaining momentum hinting at a global “soft landing.”
  • U.S. growth remains most resilient amongst developed economies while European and Australian growths are weakening. Emerging markets growth outlook is improving, with hopes for stabilization in China driven by policy support.
  • Progress on inflation and stable growth gives support for the U.S. Fed and other central banks to pivot toward rate cuts. European Central Bank is moving closer to easing as it balances fragile growth and inflation. Bank of Japan cautiously eyes exiting negative rate policy in the first half of this year. The Reserve Bank of Australia sounds more hawkish due to elevated wage inflation.
  • Key risks to global markets include impacts of geopolitical tensions, central banks’ policy divergence, a retrenchment in growth, resurgence in inflation, and trajectory of Chinese growth and policy.


No Quick FIx

Despite a range of stimulus measures rolled out since the second half of 2023, China’s economy remains challenged as little so far has led to a meaningful turnaround in activity or its stock market’s decline. While Chinese officials pledge more aggressive support, investors are becoming increasingly concerned as there seems to be a disconnect with consumer confidence sliding along with stock prices–slipping to five-year lows. While China’s troubled property sector remains at the crux of the country’s current issues, record youth unemployment above 20%, a declining population, and deflationary pressures caused by weak domestic and export demand have added to the list of headwinds. And while recent data has shown somewhat of a stabilization in declining home prices in response to stimulus measures, sales remain weak and recent news surrounding the forced liquidation of Evergrande–the country’s largest property developer–is yet another challenge to the beleaguered sector. While policymakers look to shore up the foundation of the world’s second largest economy this year, a “quick fix” is unlikely to be enough, leaving investors hopeful for more substantial policy changes to bring more sustainable growth to China.

Also read: The Three Levers in Fixed Income – Duration, Credit and Pure Relative Value

Keep On Keeping On

After a strong fourth quarter rally on rate cut hopes, investors turned a bit skittish at the start of 2024 on better-than-expected economic data pushing out those hopes–but it has since rallied back sending the S&P 500 to record highs. It is not surprising to see equity markets cheering the growing prospects of a “soft landing” with growth intact and inflation easing, giving the Fed the greenlight to loosen financial conditions in coming months. Companies too are proving resilient with earnings expectations improving and easing costs helping to boost margin expansion this year. Big Tech earnings and Artificial Intelligence (AI) euphoria are also lending support. While the momentum may continue, extended valuations and complacency could leave markets ripe for correction. There is a lot riding on the Fed keeping the course on easing that remains vulnerable to incoming data, geopolitical flashpoints are increasing across the globe and the U.S. is nearing another contentious election in coming months. But for now, it looks like stocks could keep on keeping on, looking through the risks, pointing to the positives on both the economic and earnings front.


  • We maintain a balanced view on equities supported by positive earnings trends and loosening financial conditions, against a backdrop of elevated valuations.
  • Within equities, we trimmed our overweight to Japanese equities after a solid rally in January. We also reduced our overweight to REITs to account for the risk of higher yields from here.
  • We added to the Value style, as we think a firming cyclical environment, where both growth and inflation stabilize from here, could favour value stocks.
  • Within fixed income, we remain modestly overweight cash relative to bonds. Cash continues to provide attractive yields and liquidity to take advantage of potential market dislocations.
  • While we remain overweight high yield, we started to pivot from High Yield bonds into emerging market bonds on further evidence that the disinflationary process would lead to lower yields.Note: T. Rowe Price’s Australia Investment Committee comprises local and global investment professionals who apply views from the firm’s Global Asset Allocation Committee to make informed asset allocation views from an Australian investor perspective.  The Committee is led by Thomas Poullaouec, Head of Multi-Asset Solutions APAC, based in Singapore.