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T. Rowe Price Overweights Bonds for First Time Since 2000

TedTed
in Fund Discussions
FYI: In a contrarian move, the asset allocation team at T. Rowe Price (TROW) is overweighting bonds. It’s the first time the team has made that recommendation since 2000.

The consensus among many investors is that interest rates will rise, crimping bond prices, while equities could continue to rally as the Trump administration ushers in pro-growth policies.

But T. Rowe’s David Giroux, Sébastien Page and Charles M. Shriver write in a new paper that they are concerned any upside to stocks from a strengthening economy is already priced in while downside risks are being ignored. They are making a “modest tactical shift” from equities to bonds as a way to make their portfolios more defensive and add some “dry powder” to deploy if stocks to fall from here.
Regards,
Ted
http://blogs.barrons.com/incomeinvesting/2017/02/09/t-rowe-price-overweights-bonds-for-first-time-since-2000/tab/print/

Comments

  • rforno
    Here's the full paper. Note this came out in mid-Dec but Barrons is only now reporting it?

    Postelection Asset Allocation Viewpoint
    Four Headwinds to the “Trump Trade” the Stock Market May Be Missing
    December 12 2016
    https://www4.troweprice.com/gis/fai/us/en/insights/articles/2016/q4/the-trump-trade.market-scene.html

  • briboe69
    Still waiting for the Dec annual reports from T. Rowe to come out to see if they have anything additional to add.
  • hank
    edited February 2017
    Don't know what they're smoking over there. But Price has muffed quite a few calls lately. Most glaring is a statement from the (now year-old) Annual Report for New Era (PRNEX). Anyone who's watched commodities over the past year must seriously doubt the report's claim that we were in the initial years of a commodities bear market. (It got the low in oil correct, stating it would go below $30. Doubt they had a clue it would than double to over $50 by the end of 2016.)

    "As we have written in previous shareholder letters, we believe that we are in the initial years of a secular down cycle in commodities." (Annual Report T. Rowe Price New Era Fund December 31, 2015)

    That's not to say they don't have the bond call correct. I simply don't know. I've been looking over their end of 2016 report for their target date funds and find myself in disagreement on several calls - especially their preference for domestic over international equities.
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