T. Rowe Price has held off changing exposure to Australian assets in its global multi-asset funds as it believes earnings forecasts remain elevated.
The firm closed its overweight in September after a year as it expected economic growth and earnings would be lower going forward.
Six months later, the firm remained neutral on the asset class as well as neutral on global equities.
In an asset allocation monthly update, the multi-asset team said: “Economic momentum proved to be more resilient and stronger than previously estimated. Housing rebound seems to have peaked and might become a headwind. Earnings forecasts might prove to be too elevated. We remain neutral given these competing forces”.
Positives for Australia were that a tight labor market supported the recovery in consumer spending, the value rotation supporting financials and materials and Australian assets had been more resilient to geopolitical risks than the rest of the world.
On the flip side, however, business conditions were deteriorating on the back of supply and labor shortages, rising yields were a concern in a hot property market and the dovish stance from the central bank looked unsustainable.
Elsewhere in their allocation, the global multi-asset team was underweight the US and Europe and overweight Japan and emerging markets.
While emerging markets had been affected by the war between Russia and Ukraine, the team said valuations remained attractive.
“Valuations are very attractive; however risk-off sentiment could remain a headwind. Improving outlook in China and fading COVID waves are supportive although recent conflict in Ukraine could weigh on global trade and pressure inflation higher.”
