T. Rowe Price 2015 Investment Outlook

11/23/2014

Highlights from the Conference, but you'll want to flip through the Charts

Risks in the financial markets are building and it is time to be careful.
Investors should see more divergence than usual among global economies, central bank policy responses, and market performance.
World trade has been decreasing in the years since the global financial crisis.
As countries have become more insular, domestic factors will be more likely to drive financial markets going forward.
Conditions are ripe for further stock gains in the U.S., although the upside is likely limited due to moderately high valuations and already high company profit margins.
Emerging stock markets, which have underperformed developed markets since 2011, have more compelling valuations, and the structural growth evident in many frontier markets continues to be underpriced.
In the years since the global financial crisis, slower growth has been pervasive among world economies.
Real GDP growth among advanced economies has slipped from an annual average of 3.0% in the few years (2004-2007) preceding the crisis to 1.8% in 2014.
Among emerging economies, growth has slipped from an annual average of 8.0% to 4.4% over the same time periods.
Looking to 2015 and 2016, expected average growth of 2.4% and 5.1% for advanced and emerging economies, respectively.
This is better than 2014 but somewhat below norm.

In the U.S., fiscal headwinds are easing, business capital expenditures are on the rise, and the labor market recovery is driving income and spending.
Together, these signals are pointing to the possibility of the economy reclaiming its historic annual growth rate of approximately 3%.
However, the Euro region is lagging badly, with unemployment and Eurozone bank assets trending unfavorably, leading to an outlook that is more uncertain and divergent from the U.S. than usual.
Despite Europe's challenges, the region has six of the world's ten most competitive economies and boasts companies whose debt and equity offer opportunities for investors willing to look beyond gloomy headlines.
Driven by strong corporate earnings, U.S. stocks have made a remarkable recovery in recent years.
Since bottoming in March 2009 in the wake of the global financial crisis, U.S. stocks are up 198%.
Europe and Japan have seen slower earnings and stock-price recoveries, and emerging markets have been less synchronized than usual.
In global fixed income markets, exceptionally loose monetary policy around the world has led to a feeling of relative certainty for a period of years.
With interest rates on the rise in some markets and higher rates on the horizon in other markets, including the U.S., investors can expect more uncertainty and volatility moving ahead.
This is likely to result in a greater dispersion of returns among various markets, but it should also provide investors with more opportunity.

trp_global_equities_outlook_2015.pdf
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Bradford C. Bruner for Sua Sponte Wealth Management

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