T. Rowe Price: Monthly Asset Allocation Update – September 2026

Hi, I'm Matt Bance — thanks for joining me for our September Asset Allocation Update

Today I want to walk you through three reasons why we're still overweight equities.

First up: earnings season has wrapped up, so we can finally draw some conclusions. And however you slice it, earnings were good. For example, it is estimated that the S&P 500 delivered quarterly earnings 50% higher than in the same quarter last year.

Now, it's true some of those headline numbers got a boost from one-off gains. But even stripping those out, the numbers were strong across the board.

And that held true across sectors, across regions, and right across the capitalisation spectrum.

Companies didn't just beat already-high expectations — they backed it up with upbeat guidance, a sign they're feeling more confident about business conditions.

Take Nvidia, whose earnings announcements have become something of a macro event over the past few years and reported just last week and guided to a 70% increase in revenue for calendar 2027 – above 40-50% consensus expectations. This helped settle down imminent concerns of any slowing down in AI capex, which has been weighing on market sentiment.

Second, growth measures still look pretty solid. One of my favourite reads on the economic cycle comes from Purchasing Manager Indices (or PMIs), which have trended higher — and historically, that's been a strong signal for earnings.

The fact that earnings are improving right on cue as PMIs are strengthening  reinforces the sense that this resilience is genuine rather than just idiosyncratic stories.

The US labour market's also in a good spot — strong enough to ease growth worries, but not so strong that it's stoking concerns about wage-led inflation.

Finally, nominal GDP is chugging along at over 6% - not great for bonds, part of the reason we remain underweight duration, but very helpful for equities.

And third, Trump’s tone on Iran has shifted quite noticeably. Rather than talking about further military action, he’s increasingly focused on economic sanctions and pressure. Clearly, that doesn’t take military action off the table, as we have seen over the weekend, but it does suggest another major escalation is less likely in the near term. That may be good enough for the market.

Of course, risks are still out there. Rising interest rates, more geopolitical flare-ups, and the approaching US mid-terms — which have historically brought some weakness as we get closer to them. Positioning has also picked up, but while it's a bit elevated, it's not really stretched once seen in the context of the strong historical performance and exceptional earnings we're seeing.

Thanks very much for joining us, and we look forward to updating you again next month.

Past performance is not a guarantee or a reliable indicator of future results.

The specific securities identified and described are for informational purposes only and do not represent recommendations.
 

Data as at 31.08.2026. Source: Bloomberg. “Bloomberg®” and the Bloomberg Indices are service marks of Bloomberg Finance L.P. and its affiliates, including Bloomberg Index Services Limited (“BISL”), the administrator of the index (collectively, “Bloomberg”) and have been licensed for use for certain purposes by T. Rowe Price. Bloomberg is not affiliated with T. Rowe Price, and Bloomberg does not approve, endorse, review, or recommend this Product. Bloomberg does not guarantee the timeliness, accurateness, or completeness of any data or information relating to this product.