The $1 trillion investment giant T. Rowe Price warns investors this isn't the time to 'be a hero' as risks mount

  • While the market has enjoyed an impressive rally this year, global downside risks are building, the investment firm T. Rowe Price said in a report outlining its outlook at the year’s halfway mark.
  • The upcoming US corporate earnings season is unlikely to serve as a catalyst that drives stock prices meaningfully higher, T. Rowe’s top investment officers said.
  • Visit Markets Insider’s homepage for more stories.

In the world of investing, sometimes playing the hero and taking a risk can pay off. Now probably isn’t one of those times, according to one of the world’s largest asset managers.

Escalating trade tensions between the US and China have created an unpredictable stock market environment, and investors would be prudent to take mounting geopolitical risks into consideration, top T. Rowe Price investment officers said in a report.

“Markets are near highs and risks are rising, so it’s not time to be a hero,” Rob Sharps, the firm’s head of investments and group chief investment officer, said. “It’s a good time to be diversified, invest strategically, and have your shopping list ready in case stocks pull back and go on sale.”

Slowing global economic growth could improve if trade relations between the US and China don’t deteriorate further, the firm said. While T. Rowe – which oversees $US1.07 trillion in assets – is “generally constructive” on the market through year-end, “risks are building.”

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Those risks include expectations for a sluggish US corporate earnings season, earnings momentum turning negative in Europe and in Japan, and the potential for federal anti-trust regulation looming over big tech.

“The trade war between the US and China is metastasizing into a technology war,” Justin Thomson, the firm’s chief investment officer of equities, said in the report. “This could make settlement harder, as both countries may believe that critical technology advantages are at stake.”

More granularly, the firm made note of the trade war’s “corrosive” effect on business confidence and capital spending, notably in export-heavy economies like Germany and Taiwan.

Investors may find some clarity on the international trade situation later this week when President Donald Trump and Chinese President Xi Jinping are set to convene at the G20 summit in Osaka, Japan.

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