Pruis 2025 Mid-Year Investment Outlook: Changes in the Bond Market Landscape, Corporate Credit Outlook More Optimistic Compared to Developed Market Sovereign Bonds

According to the Zhitong Finance APP, T. Rowe Price has released its mid-2025 investment outlook, indicating that the investment prospects for the second half of 2025 will be influenced by three major themes: the stock market will be led by large U.S. technology stocks and expand to a broader market; the bond market landscape will shift, making corporate credit more optimistic compared to developed market sovereign bonds; and in an environment of continued slowing growth and high inflation, active asset allocation strategies will become increasingly important.

Blerina Uruci, Chief Economist at T. Rowe Price, stated that the U.S. government's tariff measures, combined with retaliatory measures from trade partners, will create supply shocks for the U.S. and impact global demand. Fiscal measures such as deregulation and tax cuts may pose additional upside risks to economic growth and inflation prospects. The Federal Reserve faces a difficult balance between inflation risks and supporting a weak economy, a situation that may persist into the second half of 2025.

Rahul Ghosh, a global equity portfolio specialist at T. Rowe Price, pointed out that tariffs and trade tensions have accelerated the trend of expanding opportunities in the U.S. stock market and even the international stock market. Although this trend began before last year's U.S. presidential election, recent fiscal stimulus measures introduced by multiple countries are expected to further drive its development. We are returning to an investment environment where returns are generated by more regions and sectors, requiring investors to adopt diversified investment strategies and flexible deployments.

Wu Xindian, an equity portfolio specialist at T. Rowe Price, noted that DeepSeek reflects China's technological development in the field of artificial intelligence, and the pace of technological innovation is expected to accelerate further in the coming years. Although there are still challenges in computing power, China has advantages in the application and commercialization of AI technology. Meanwhile, China's consumer market is undergoing transformation, with "new consumption models" bringing development opportunities in areas such as collectible brands, fresh beverages, snacks, and music. The continuously changing consumer market is also driving innovation and growth, providing investors with investment opportunities that are less affected by trade uncertainties.

Guan Zhiling, manager of T. Rowe Price's Flexible Emerging Markets Bond Strategy, stated that T. Rowe Price focuses on diversifying investments into higher-quality and more resilient emerging market regions, which have advantages in trade, inflation, and policy trends, helping to mitigate risks from dollar fluctuations and fiscal issues. T. Rowe Price tends to adopt shorter-duration deployments, and as spreads narrow, this strategy can still provide attractive yield and income opportunities. In the face of many uncertainties brought about by trade negotiations and tariff policies, maintaining ample liquidity and investment flexibility will be key.

Thomas Poullaouec, head of multi-asset solutions for the Asia-Pacific region at T. Rowe Price, stated that given high valuations, T. Rowe Price holds a cautious attitude towards equities (especially U.S. stocks); however, it is optimistic about the earnings prospects of more competitive European and emerging market stocks that are expected to benefit from stimulus measures. Due to upward pressure on U.S. interest rates, it holds a lower weight in bonds but a higher weight in higher-yielding bonds, as their fundamentals still provide support. In an environment of expected market volatility, maintaining a higher weight in cash is advisable, as it offers attractive returns and liquidity