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The Cycle Where Are We Implications for Global Equity Investors

Complex environments need active management to help steer portfolios in the right direction.

David J. Eiswert, Portfolio Manager
T. Rowe Price,  September 2021

Equity markets have continued to make gains despite concerns around the new delta variant of COVID 19 as accelerated vaccine distribution has helped fuel expectations of a relative return to normal. Within equity markets, much debate centers on the future path of interest rates, inflation, and economic growth. Here, we analyze where we believe we are in this current cycle.


Asset Prices Are High for a Reason

Asset prices are high because interest rates remain low, and there is no credit cycle to act as a disruptor. Both governments and central banks have proven to be a good backstop to a global pandemic that would have otherwise had much more severe consequences for financial markets without the unprecedented intervention taken. The outcome is that there appears to be little systematic risk if interest rates can stay at low levels and COVID.19 slowly gets better. However, we are seeing ample examples of careless risk taking in financial markets. History suggests that this type of behavior should be actively managed within portfolios.

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