MONTHLY MARKET REVIEW

January 2020

▪ U.S. Stocks

▪ International Stocks

▪ Fixed Income Markets

▪ Global Capital Markets

Environment

▪ Emerging Markets

Stocks

MONTHLY MARKET REVIEW

U.S. Stocks January 2020

January brought mixed results from the major indexes, as fears at the end of the month over the

global economic impact of the new coronavirus spreading in and beyond China eroded earlier gains. Sector returns within the S&P 500 Index varied widely, with energy shares tumbling over 11% in total return terms (including dividends), while the interest rate‑sensitive utilities sector rose nearly 7%. The much larger technology sector was also strong, which was reflected in the outperformance of the tech‑heavy Nasdaq Composite Index. The Cboe Volatility Index (VIX) spiked to its highest level since October as virus worries gripped the market in the final week of the month.

Stocks Rise Early in the Month on Global Growth Hopes, but U.S. Data Are Mixed

Markets advanced throughout much of the first half of January, helped by the consummation of a “phase one” trade deal with China. Just before the month began, President Donald Trump announced that the deal would be signed on January 15 at the White House and that he would then soon travel to China to negotiate a more comprehensive “phase two” agreement. Investors appeared optimistic that easing tensions would spur a rebound in global growth in 2020, and the S&P 500 Index recorded its second‑best day of the month on January 2 after China announced new monetary stimulus. The U.S. strike on Iranian military leader Qassim Soleimani and Iran’s retaliatory missile attack on two U.S. air bases

in Iraq sparked some volatility early in the month, but investors seemed to conclude that both sides were eager to avoid further escalation.

Even as investors looked forward to stronger growth in China and elsewhere, U.S. economic signals were arguably disappointing as the month began. The Institute for Supply Management reported that its gauge of U.S. manufacturing activity had declined unexpectedly in December, pushing it to a 10‑year low. Payroll gains in December missed expectations by a bit, while average hourly earnings rose only 0.1% in the month, the worst showing since September. More encouraging data emerged later in the month. On January 17, the Commerce Department reported that housing starts reached their highest level in 13 years in December, which was soon followed

Total Returns

January Year‑to‑Date

Dow Jones Industrial Average ‑0.89% ‑0.89%

S&P 500 Index ‑0.04 ‑0.04

Nasdaq Composite Index 1.99 1.99

S&P MidCap 400 Index ‑2.61 ‑2.61

Russell 2000 Index ‑3.21 ‑3.21

Past performance is not a reliable indicator of future performance. Note: Returns are for the periods ended January 31, 2020. The returns include dividends based on data supplied by third‑party provider RIMES and compiled by T. Rowe Price, except for the Nasdaq Composite Index, whose return is principal only. Sources: Standard & Poor’s, LSE Group. See Additional Disclosures.

MONTHLY MARKET REVIEW: U.S. STOCKS

by news that existing home sales had reached a nearly two‑year peak. The number of previously owned homes for sale also reached a record low, which bodes well for future construction activity, according to T. Rowe Price Chief U.S. Economist Alan Levenson.

News of First U.S. Case of Novel Coronavirus Derails Rally

Just as the economic picture grew more encouraging, reports of the widening novel coronavirus outbreak in China arrived and derailed the market’s gains. The market suffered its first setback on Tuesday, January 21, as traders returned from the Martin Luther King, Jr., holiday weekend to news that the first patient in the U.S. had been diagnosed with the virus. Reports of the virus’s spread appeared to drive further sharp declines over the coming days, with gaming, airline, and travel‑related shares bearing

the brunt of the selling. However, the Chinese government’s announcement of forceful responses to the epidemic, including massive quarantines and travel restrictions, seemed to periodically reassure investors.

Earnings Growth Fails to Restart

Investors also paid close attention to the fourth‑quarter earnings reports released during the month, although they seemed to bring fewer surprises than usual—according to FactSet, 69% of the S&P 500 companies that released reports in January beat earnings estimates, somewhat below the average level in recent years. Analysts polled by FactSet were also anticipating a small (0.3%) drop in overall year‑over‑year profits for the S&P 500, which would mark the fourth straight quarterly decline. Energy companies and firms that generate most of their revenue outside

the U.S. were largely responsible for the weakness, according to FactSet (see Additional Disclosures).

Valuations Are Elevated but Not at Dangerous Levels

Opinions among T. Rowe Price equity managers vary, but many agree that stock valuations appear elevated—though not at the dangerous levels that suggest a market bubble. Moreover, they see few signs of widespread asset price inflation and market excess that characterized the dot‑com bubble of the late 1990s and the housing bubble several years later. Nevertheless, stock valuations increased considerably in 2019 as the market advanced while corporate earnings were roughly flat. If the market is to maintain its upward momentum in 2020, some notable improvement in earnings will likely be necessary.

Additional Disclosures

Financial data and analytics provider FactSet. Copyright 2020 FactSet. All Rights Reserved.

London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). © LSE Group 2020. FTSE Russell is a trading name of certain of the LSE Group companies. “Russell®” is a trade mark of the relevant LSE Group companies and is used by any other LSE Group company under license. All rights in the FTSE Russell indexes or data vest in the relevant LSE Group company which owns the index or the data. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indexes or data and no party may rely on any indexes or data contained in this communication. No further distribution of data from the LSE Group is permitted without the relevant LSE Group company’s express written consent. The LSE Group does not promote, sponsor or endorse the content of this communication.

The S&P 500 Index and S&P MidCap 400 Index are products of S&P Dow Jones Indices LLC, a division of S&P Global, or its affiliates (“SPDJI”) and have been licensed for use by T. Rowe Price. Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC, a division of S&P Global (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”); T. Rowe Price is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500 Index and S&P MidCap 400 Index.

MONTHLY MARKET REVIEW

International Stocks January 2020

Equities in developed non‑U.S. markets fell in January as geopolitics and the coronavirus

outbreak believed to have originated in Wuhan, China, overshadowed improvements in U.S.‑China trade relations. Early in the month, markets were unsettled by the U.S. airstrike on an Iranian military leader in Iraq and Iran’s retaliation against two U.S. air bases in Iraq. By month‑end, the World Health Organization declared the coronavirus outbreak a global emergency, airlines moved to limit traffic with China, and many countries imposed entry restrictions as the number of people infected with the coronavirus approached 10,000.

The MSCI EAFE Index, which measures the performance of stocks in Europe, Australasia, and the Far East, declined 2.08%. Within the index, nine sectors lost ground, led by energy, materials, and consumer discretionary. Two sectors—health care and utilities—advanced. Value stocks in the EAFE index fell 3.60%, underperforming growth shares, which dropped 0.57%. Emerging equity markets generally underperformed stocks in developed markets, led by declines in Latin America.

European Stocks Fall on Risk to Global Growth From Coronavirus

Equities in Europe fell as the rapid spread of the coronavirus in China sparked fears of a pandemic and a hit to global economic growth. Those

worries added to concerns about weaker‑than‑expected economic data. The eurozone economy grew at a slower‑than‑expected rate in the fourth quarter, as gross domestic product (GDP) expanded 0.1% during the quarter and 1.0% for the year. T. Rowe Price International Economist Tomasz Wieladek said France and Italy were the main reason for slower‑than‑expected overall GDP growth. The French economy came under pressure from public sector strikes at the end of 2019. Although Germany’s economy ministry raised its forecast for 2020 growth to 1.1% from 1.0%, citing an improved trade outlook, strong domestic demand, and a higher number of working days this year, preliminary GDP data showed that the German economy expanded

Total Returns

MSCI Indexes January Year‑to‑Date

EAFE (Europe, Australasia, Far East) -2.08% -2.08%

All Country World ex USA -2.67 -2.67

Europe -2.50 -2.50

Japan -1.36 -1.36

All Country Asia ex Japan -4.45 -4.45

EM (Emerging Markets) -4.66 -4.66

Past performance is not a reliable indicator of future performance. All data are in U.S. dollars and represent gross returns as of January 31, 2020. This table is shown for illustrative purposes only and does not represent the performance of any specific security.Source: MSCI. See Additional Disclosures.

MONTHLY MARKET REVIEW: INTERNATIONAL STOCKS

only 0.6% in 2019, well below the 1.5% growth rate in 2018 and at the slowest pace since 2013.

British Stocks Fall as UK Officially Leaves EU

The British pound slipped about 0.5% against the dollar, and equities declined nearly 4% in U.S. dollar terms, as the UK officially left the European Union (EU) on January 31. The withdrawal agreement provides an 11‑month post‑Brexit transition period for industries and markets. However, British officials will no longer be privy to official EU communiqués or have entry into EU headquarters.

Bank of England Downgrades UK Growth Outlook

Meanwhile, the Bank of England (BoE) downgraded its growth forecasts to the lowest level since World War II. The BoE expects that the economy can only grow at an average 1.1% rate over the next three years without creating inflation pressures. In December, the central bank held rates unchanged, pointing to improved business sentiment in the wake of the UK December election. IHS/Markit/CIPS data showed UK manufacturing got a boost from the December election result. IHS noted that reduced political uncertainty led to a slight recovery of new orders and business confidence and a stabilization of production volumes.

Japanese Equities Fall; Exports Decline for 13th Month

Stocks in Japan fell with other developed markets on worries about a global economic slowdown caused by the spreading coronavirus. Japanese officials have warned that Japan’s corporate revenues, earnings, and factory production might be hurt by the outbreak. In addition to being Japan’s leading trading partner, China accounted for about one‑third of the tourists visiting Japan last year, and their spending represented about 40% of the total spent by foreigners. Exports declined for the 13th consecutive month, dropping 6.3% year over year under pressures from a drop in U.S.‑bound shipments. The U.S. is Japan’s second‑largest trading partner after China, and Japanese shipments to the U.S. fell 14.9% year over year in December.

Emerging Markets Underperform Developed Markets

Stocks in developing markets underperformed those in developed markets, as investors sold riskier assets in line with growing fears of the toll the coronavirus could take on economic activity. The MSCI Emerging Markets Index dropped 4.66%, led by declines in Latin America, where many markets declined more than 6% in U.S. dollar terms amid expectations that weaker

Chinese demand would hurt the region’s commodity exports. Mexican stocks, however, rose over 1% after President Donald Trump signed the United States‑Mexico‑Canada Agreement, which replaces the North American Free Trade Agreement. In emerging Europe, oil producer Russia declined 3% as oil prices fell, while Turkish shares climbed about 1.5%, helped by a central bank interest rate reduction amid improvement in the inflation outlook.

Outlook: Global Growth Slowly Improving

Significant moves by global central banks to loosen monetary policy have eased financial conditions, which is supportive of global economic activity. Until recently, global manufacturing purchasing managers’ surveys suggest that activity may be picking up. With the recent outbreak of the coronavirus, the associated factory closures in China will likely weigh on global activity in the short term, an easing of trade tensions between the U.S. and China will likely support a rebound in global growth in the medium term, assuming that Chinese growth recovers as the outbreak is contained.

Additional Disclosures

MSCI and its affiliates and third party sources and providers (collectively, “MSCI”) makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed, or produced by MSCI. Historical MSCI data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. None of the MSCI data is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such.

MONTHLY MARKET REVIEW

Fixed Income Markets January 2020

Longer‑term Treasury yields tumbled in January to the lowest levels in four months amid

concerns about the potential economic impact of the new coronavirus that erupted in China. After starting the year at 1.92%, the yield of the benchmark 10‑year Treasury note fell to 1.51% by month‑end. (Bond prices and yields move in opposite directions.)

Longer‑Term Treasury Yields Drop to Four‑Month Lows

Although Treasury yields had climbed in late 2019 as investor demand for safe‑haven securities waned, the trend began to reverse early in the new year. The U.S. drone strike on an Iranian general and the Iranian counterattack on a U.S. base in Iraq pressured yields lower at the start of January, and the

virus outbreak in China led to a more profound shift in market sentiment over the last two weeks of the month.

As investors became increasingly concerned that the spreading virus could derail a rebound in global growth, the 10‑year Treasury yield fell 33 basis points (0.33 percentage point) in nine trading days. Meanwhile, the 30‑year Treasury bond’s yield dipped below the 2% level and finished the month at 1.99%. Some optimistic signals during the month, including the signing of the long‑awaited U.S.‑China phase one trade deal and strong housing data, were not enough to offset the market’s risk‑off pivot.

Shorter‑term Treasury yields declined less than yields of longer‑maturity securities, leading to an inversion of

the three‑month/10‑year segment of the Treasury yield curve, meaning the shorter‑maturity security had a higher yield than its longer‑term counterpart. An inversion in that part of the curve has frequently been a precursor to recessions in the past; however, the two‑year/10‑year portion of the curve, which is also frequently cited for its recession‑predicting ability, did not invert.

After Three Rate Cuts in 2019, Fed Holds Rates Steady

As expected, the Federal Reserve’s monetary policy committee voted at its January meeting to keep its short‑term benchmark lending rate in a range of 1.50% to 1.75%. After cutting rates three times last year to address a slowing economy, the Fed has now kept rates steady for two straight meetings.

Total Returns

Index January Year‑to‑Date

Bloomberg Barclays U.S. Aggregate Bond Index 1.92% 1.92%

J.P. Morgan Global High Yield Index 0.24 0.24

Bloomberg Barclays Municipal Bond Index 1.80 1.80

Bloomberg Barclays Global Aggregate Ex‑U.S. Dollar Bond Index 0.76 0.76

J.P. Morgan Emerging Markets Bond Index Global Diversified 1.52 1.52

Bloomberg Barclays U.S. Mortgage Backed Securities Index 0.70 0.70

Past performance is not a reliable indicator of future performance.Figures as of January 31, 2020. This table is shown for illustrative purposes only and does not represent the performance of any specific security.Sources: RIMES, as of January 31, 2020; Bloomberg Index Services Limited, J.P. Morgan. See Additional Disclosures.

MONTHLY MARKET REVIEW: FIXED INCOME MARKETS

The central bank’s post‑meeting statement was virtually unchanged from the one issued following its December meeting, but policymakers did note that the rise in household spending has dropped from a strong pace to a more moderate level. The Fed also said that it will keep buying Treasury bills until at least the beginning of the second quarter to maintain liquidity in short‑term lending markets.

At his post‑meeting press conference, Fed Chair Jerome Powell said that he believes monetary policy is at an appropriate level to support growth after the central bank’s 2019 rate cuts; however, by month‑end, the futures market was pricing in another Fed rate cut by June.

Investment‑Grade Corporates Deliver Solid Results

Most fixed income sectors benefited from falling yields during the month, although higher‑quality segments generally outperformed, led by longer‑term Treasuries. Investment‑grade corporate bonds were bolstered by strong demand and manageable supply, and T. Rowe Price traders noted that it was the second busiest four‑week period on record in terms of inflows. However, corporates faced headwinds from declining investor risk

appetite in the second half of the month. Securitized debt also delivered solid results, led by commercial mortgage‑backed securities. Treasury inflation protected securities (TIPS) performed well but lagged nominal Treasuries as inflation expectations declined during the month.

Municipal bonds benefited from a supportive technical backdrop. Cash flows to the asset class remained strong, and while municipal issuance was heavy overall, tax‑exempt issuance was muted as many municipalities have been refunding debt in the taxable market. Yields for 10‑ and 30‑year municipal bonds fell to record lows. Despite experiencing an earthquake early in the month, bonds from Puerto Rico performed well, as did debt from some other lower‑quality issuers.

Falling Oil Prices Weigh on High Yield Performance

After a strong start to the year, high yield bonds finished with modest gains as the market rapidly shifted to a risk‑off environment over the last two weeks of the month. Lower‑quality bonds underperformed higher‑quality debt, and the large high yield energy sector was hurt by tumbling oil prices. Floating rate loans outperformed high yield bonds.

High‑Quality Sovereign Bond Yields Trend Lower

Demand for high‑quality government bonds increased globally during the month and drove yields lower. The yields of 10‑year sovereign bonds in Germany and Japan fell deeper into negative territory. Central banks in Japan, the eurozone, and the UK kept their benchmark lending rates unchanged in January, although the Bank of Japan slightly upgraded its fiscal year 2020 growth forecast to 0.9% from 0.7% due to fiscal stimulus and easing trade tensions. Currency returns were mixed for the month. The U.S. dollar strengthened versus the euro and British pound but lost ground versus the Japanese yen.

Emerging markets bonds were supported by continued inflows. Central banks in Ukraine, Turkey, and South Africa cut key lending rates to spur growth and address below‑target inflation. Bond rating agency Moody’s delayed a possible downgrade of South Africa’s sovereign debt to junk status, saying it was “a bit early” to judge the country’s progress on reforms.

Outlook: Emerging Market Environment Supportive, But Risks Remain

In a recent discussion of the outlook for fixed income in 2020, Arif Husain, a T. Rowe Price portfolio manager, said he believes the environment for emerging markets bonds is broadly supportive. However, he noted that the sector faces a high level of uncertainty and that there is potential for significant headline risk. Within frontier markets, the situation could be more volatile because access to liquidity can often be strained, resulting in rapid, large price dislocations when there’s a risk event. Last year, the most extreme example of this was Lebanon, where protests triggered a significant sell‑off in domestic government bonds.

U.S. Treasury Yields

Maturity December 31 January 31

3‑Month 1.55% 1.55%

6‑Month 1.60 1.54

2‑Year 1.58 1.33

5‑Year 1.69 1.32

10‑Year 1.92 1.51

30‑Year 2.39 1.99

Source: Federal Reserve Board.

MONTHLY MARKET REVIEW: FIXED INCOME MARKETS

Additional DisclosuresBloomberg Index Services Limited. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). BARCLAYS® is a trademark and service mark of Barclays Bank Plc (collectively with its affiliates, “Barclays”), used under license. Bloomberg or Bloomberg’s licensors, including Barclays, own all proprietary rights in the Bloomberg Barclays Indices. Neither Bloomberg nor Barclays approves or endorses this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith.

Information has been obtained from sources believed to be reliable, but J.P. Morgan does not warrant its completeness or accuracy. The index is used with permission. The index may not be copied, used, or distributed without J.P. Morgan’s prior written approval. Copyright © 2020, J.P. Morgan Chase & Co. All rights reserved.

MONTHLY MARKET REVIEW

Global Capital Markets Environment January 2020

Equities in the U.S. were volatile in January, and most major indexes declined following robust returns

in 2019. Stocks experienced a pullback near the start of the month, following a U.S. airstrike that killed an Iranian military leader near Baghdad, Iraq. In the ensuing days, Iran retaliated with missile attacks on two U.S. air bases in Iraq, but the apparent lack of a U.S. response diminished fears of a wider armed conflict between the U.S. and Iran.

Stocks climbed into the middle of the month―with several indexes reaching new all‑time highs―as the U.S. and China officially signed the much anticipated “phase one” trade pact on January 15 in Washington, D.C. As part of the agreement, China pledged to buy an additional USD 200 billion of U.S. goods, including agricultural products and manufactured goods. In return, the U.S. agreed to cut the tariffs on some Chinese goods from 15% to 7.5%.

Investor sentiment quickly shifted from bullish to bearish, as the rapid spread

of the coronavirus in and beyond China sent global stocks into a tailspin toward the end of the month. News of the first confirmed case in the U.S. was particularly troubling to investors, resulting in a sell‑off of tourism, airline, and gaming stocks. By month‑end, several international airlines reduced or canceled flights to mainland China as the total number of confirmed coronavirus cases rose rapidly, and the U.S. State Department warned U.S. citizens not to travel to China.

Large‑cap shares held up better than mid‑ and small‑caps. The large‑cap S&P 500 Index returned ‑0.04% versus ‑2.61% for the S&P MidCap 400 Index and ‑3.21% for the small‑cap Russell 2000 Index. As measured by various Russell indexes, growth stocks outperformed value stocks across all market capitalizations, continuing last year’s trend.

In the large‑cap universe, as measured by the S&P 500, sector performance was widely mixed. Higher‑yielding utilities shares―which often behave

like bonds in response to interest rate movements—generated the best returns as long‑term Treasury rates plunged to levels not seen since late‑summer 2019. Information technology shares also performed well, buoyed by Apple, which hit an all‑time high near the end of the month after reporting the highest quarterly revenue in its history. Communication services, consumer discretionary, and consumer staples companies rose slightly. Financials and health care stocks underperformed the index with relatively mild losses. Energy stocks plunged as oil prices declined amid concerns that slowing economic growth in China and around the world would reduce energy demand. Materials stocks also fell, but to a lesser extent, amid expectations for weaker global growth and weaker commodity demand from China.

Domestic investment‑grade taxable bonds produced positive returns as longer‑term interest rates flirted with last year’s late‑summer lows. The Bloomberg Barclays U.S. Aggregate

U.S. Stock Returns

S&P 500 Index

S&P MidCap 400 Index

Russell 2000 Index

January ‑0.04% ‑2.61% ‑3.21%

Year‑to‑Date ‑0.04 ‑2.61 ‑3.21

Past performance is not a reliable indicator of future performance. Sources: RIMES, as of January 31, 2020; Standard & Poor’s, LSE Group. See Additional Disclosures.

MONTHLY MARKET REVIEW: GLOBAL CAPITAL MARKETS ENVIRONMENT

Bond Index returned 1.92%. Sector performance was broadly positive. Longer‑term Treasuries soundly outperformed other segments. Investment‑grade corporate bonds rose to a lesser extent. Asset‑ and mortgage‑backed securities rose slightly and underperformed the index. Tax‑free municipal bonds narrowly lagged the broad taxable bond market. High yield bonds trailed with mostly flat returns, as a volatile stock market and concerns about global growth caused many investors to favor lower‑risk assets. Plunging oil prices hurt bonds issued by energy companies, which represent a significant portion of the high yield market.

Stocks in developed non‑U.S. equity markets declined in January. The MSCI EAFE Index, which measures the performance of stocks in Europe, Australasia, and the Far East, returned ‑2.08%.

European stock markets were mostly lower in U.S. dollar terms as the spread of the coronavirus from China’s Hubei province kept stocks under pressure. Portuguese shares bucked the negative trend and returned almost 5% in dollar terms. In oil producer Norway, stocks fell about 6.5%. German shares returned roughly ‑3%, as preliminary data showed the German economy expanded only 0.6% in 2019. This is well below the 1.5% gross domestic product growth rate from the prior year and is the country’s slowest growth rate since 2013. British shares declined nearly 4% as the UK formally left the European Union (EU) on January 31, becoming the first country to ever do so. This begins an 11‑month transition period during which the UK and the EU will negotiate the details of their new relationship, particularly pertaining to trade.

Developed Asian and Far East markets were mostly negative, as the coronavirus

outbreak in China weighed on the region. Markets in Hong Kong and Singapore declined about 4.5% and 3.5%, respectively. Japanese shares fell more than 1%, as the country’s monthly exports retreated for a 13th consecutive month in December. Australian shares were essentially flat.

Emerging markets stocks underperformed developed markets. The MSCI Emerging Markets Index returned ‑4.66%. Emerging Asian markets were broadly negative, as the announcement of the U.S.‑China phase one trade agreement was trumped by the rapid spread of the coronavirus in China. Several markets in the region were closed for varying periods toward the end of the month for Lunar New Year holidays. Stocks in Thailand and the Philippines dropped 8%, whereas South Korean shares skidded more than 5% in U.S. dollar terms. Stocks in India slipped less than 1%.

In emerging Europe, equity markets were mostly negative. Central European markets declined, especially Hungary, where shares dropped more than 10% in U.S. dollar terms. Stocks in oil producer Russia slid 3% amid falling oil prices and a government shake‑up following President Vladimir Putin’s call for constitutional reforms. Conversely, Turkish shares rose about 1.5%, helped by a central bank interest rate reduction amid improvement in the inflation outlook. In Latin America, most major markets declined at least 6% in U.S. dollar terms, hurt by expectations for weaker Chinese demand for the region’s commodity exports. Shares in Argentina fell a little less than 3%, whereas Mexican shares bucked the negative trend and rose over 1%. President Donald Trump’s signing of the United States‑Mexico‑Canada Agreement, which replaces the North American Free Trade Agreement, helped investor sentiment.

Bonds in developed non‑U.S. markets produced modest positive returns in

U.S. Bond Returns

Bloomberg Barclays U.S. Aggregate

Bond Index

Bloomberg Barclays Municipal

Bond Index J.P. Morgan Global

High Yield Index

January 1.92% 1.80% 0.24%

Year‑to‑Date 1.92 1.80 0.24

Past performance is not a reliable indicator of future performance. Sources: RIMES, as of January 31, 2020; Bloomberg Index Services Limited, J.P. Morgan. See Additional Disclosures.

Non‑U.S. Stock Returns

MSCI EAFE IndexMSCI Emerging Markets Index

January ‑2.08% ‑4.66%

Year‑to‑Date ‑2.08 ‑4.66

Past performance is not a reliable indicator of future performance. Sources: RIMES, as of January 31, 2020; MSCI. See Additional Disclosures.

MONTHLY MARKET REVIEW: GLOBAL CAPITAL MARKETS ENVIRONMENT

Non‑U.S. Bond Returns

Bloomberg Barclays Global Aggregate Ex‑U.S.

Dollar Bond Index

J.P. Morgan Emerging Markets Bond Index

Global DiversifiedJ.P. Morgan GBI‑EM

Global Diversified Index

January 0.76% 1.52% ‑1.29%

Year‑to‑Date 0.76 1.52 ‑1.29

Past performance is not a reliable indicator of future performance. Sources: RIMES, as of January 31, 2020; Bloomberg Index Services Limited, J.P. Morgan. See Additional Disclosures.

U.S. dollar terms. Bond prices rose as yields fell in most markets as investors flocked to safer assets amid coronavirus fears, but a stronger dollar versus the euro and British pound reduced returns to U.S. investors. In the UK, 10‑year gilt yields plunged to lows not seen since October. Outgoing Bank of England Governor Mark Carney indicated that there was a case for cutting UK interest

rates promptly “if evidence builds that the weakness in activity could persist.” In Japan, the 10‑year government bond yield ended the month at roughly ‑0.07%. The Bank of Japan left its interest rate and asset purchase targets unchanged at the central bank meeting that ended on January 21.

Emerging markets bonds produced mixed returns in January as investors

generally shunned riskier assets due to concerns that the spread of the coronavirus would weaken global growth. Bonds denominated in U.S. dollars advanced as the U.S. dollar strengthened against most emerging currencies. Conversely, local currency bonds displayed negative returns, with the South African rand, Chilean peso, and Brazilian real plunging versus the dollar.

Additional Disclosures

Bloomberg Index Services Limited. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). BARCLAYS® is a trademark and service mark of Barclays Bank Plc (collectively with its affiliates, “Barclays”), used under license. Bloomberg or Bloomberg’s licensors, including Barclays, own all proprietary rights in the Bloomberg Barclays Indices. Neither Bloomberg nor Barclays approves or endorses this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith.

Information has been obtained from sources believed to be reliable, but J.P. Morgan does not warrant its completeness or accuracy. The index is used with permission. The index may not be copied, used, or distributed without J.P. Morgan’s prior written approval. Copyright © 2020, J.P. Morgan Chase & Co. All rights reserved.

London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). © LSE Group 2020. FTSE Russell is a trading name of certain of the LSE Group companies. “Russell®” is a trade mark of the relevant LSE Group companies and is used by any other LSE Group company under license. All rights in the FTSE Russell indexes or data vest in the relevant LSE Group company which owns the index or the data. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indexes or data and no party may rely on any indexes or data contained in this communication. No further distribution of data from the LSE Group is permitted without the relevant LSE Group company’s express written consent. The LSE Group does not promote, sponsor or endorse the content of this communication.

MSCI and its affiliates and third party sources and providers (collectively, “MSCI”) makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed, or produced by MSCI. Historical MSCI data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. None of the MSCI data is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such.

The S&P 500 Index and S&P MidCap 400 Index are products of S&P Dow Jones Indices LLC, a division of S&P Global, or its affiliates (“SPDJI”) and have been licensed for use by T. Rowe Price. Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC, a division of S&P Global (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”); T. Rowe Price is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500 Index and S&P MidCap 400 Index.

MONTHLY MARKET REVIEW

Emerging Markets Stocks January 2020

Emerging markets stocks dropped in January as investors’ risk appetite took a hit from the

worsening coronavirus outbreak in China. The MSCI Emerging Markets Index hit its high for the month on January 17, two days after the U.S. and China signed a phase one trade deal that marked a thaw in nearly three years of rising trade tensions. However, emerging markets stocks reversed course and fell into the red for the rest of the month as the coronavirus epidemic spread beyond China and turned into a global health emergency. January’s decline marked the worst month for the MSCI Emerging Markets Index since August. All 11 sectors in the index fell, led by a double‑digit drop in real estate stocks. Health care stocks declined the least.

Chinese U.S.‑Listed Shares Fall on Virus Outbreak; Indian Stocks Outperform on Stimulus Hopes

U.S. dollar‑denominated Chinese shares fell about 5.0% as the coronavirus weighed on the country’s growth outlook. China’s central bank cut its required reserve ratio on January 1 in an effort to lower borrowing costs for companies. Yuan‑denominated A shares declined modestly but didn’t reflect the full extent of coronavirus fears since mainland markets were closed from January 23 to February 3 for an extended Lunar New Year holiday.

Indian stocks declined slightly, outperforming most other Asian markets, amid optimism that the government would announce significant economic stimulus when it presented the country’s annual budget on February 1.

Southeast Asian stocks fell, led by roughly 8.0% losses in Thailand and the Philippines, as the prospect of weaker Chinese demand reverberated across the region. The Philippines reported that its economy grew 6.4% in last year’s fourth quarter and 5.9% for the full year, lagging the government’s revised target of at least 6.0%. Malaysia’s central bank unexpectedly cut its benchmark interest rate by 25 basis points to 2.75%, its lowest level since 2011, to bolster its economy, while Indonesia’s central bank left its key rate on hold.

Brazilian Stocks Retreat as Indicators Signal Weak Economy; Andean Markets Drop as Unrest Flares

Brazilian stocks shed more than 7%. Brazil released weaker‑than‑forecast monthly indicators of retail sales, services,

Total Returns

MSCI Index January Year‑to‑Date

Emerging Markets (EM) -4.66% -4.66%

EM Asia -4.49 -4.49

EM Europe, Middle East, and Africa (EMEA) -4.79 -4.79

EM Latin America -5.59 -5.59

Past performance is not a reliable indicator of future performance. All data are in U.S. dollars as of January 31, 2020. This table is shown for illustrative purposes only and does not represent the performance of any specific security.Source: MSCI. See Additional Disclosures.

MONTHLY MARKET REVIEW: EMERGING MARKETS STOCKS

and industrial production, tempering optimism about a rapid economic recovery and raising the prospect that its central bank might cut borrowing rates at its next meeting in February.

Mexican stocks rose slightly despite weaker‑than‑expected data. Mexico’s economy shrank an annualized 0.3% in the fourth quarter, unchanged from the prior three months, and contracted 0.1% in 2019 in its weakest performance since the 2009 recession, according to preliminary data. The data confirmed Mexico as one of last year’s worst‑performing major emerging markets and dimmed expectations for a strong recovery this year.

Andean markets posted mid‑single‑digit losses as antigovernment protests resumed in Chile and Colombia and China’s virus‑induced slowdown dimmed the outlook for the region’s commodity‑driven economies. Central banks in Chile, Colombia and Peru kept their respective benchmark interest rates steady.

Russian Stocks Weaken After Government Shake‑Up; South African Stocks Fall on Weak Macro Outlook

Russian stocks declined 3.0% and the ruble weakened by almost as much amid increased political uncertainty after President Vladimir Putin announced a shake‑up of Russia’s government and announced plans for major constitutional reforms, clouding the outlook for fiscal and monetary policy continuity.

South African stocks sank nearly 9.0%. South Africa’s central bank reduced its benchmark rate by 25 basis points to a four‑year low of 6.25% and cut its economic growth forecasts for 2019 through 2022. The International Monetary Fund warned that South Africa has “no fiscal space” and must push through reforms to control government debt, which analysts say is approaching unsustainable levels.

Turkish stocks edged higher. Turkey’s central bank reduced its key rate for the fifth straight meeting. The latest cut took the benchmark rate to 11.25% from 12.0% and marked the bank’s smallest reduction since the current easing cycle began under a new governor appointed in July.

Solid Fundamentals in Emerging Markets Offset Near‑Term Risks

We are optimistic about the long‑term outlook for emerging markets. Most developing countries have smaller current account deficits, larger foreign exchange reserves, and more flexible currencies than they did in previous decades, reducing the risk of a financial crisis. Compared with developed markets, most emerging markets have more attractive demographics and a stronger tailwind from rising consumption. Corporate earnings in emerging markets have recovered after years of disappointing performance, and valuations for many companies are attractive compared with their developed markets peers. Trade tensions, political unrest in a few markets, slowing global growth, and most recently the coronavirus epidemic are the most pressing near‑term risks. However, we believe that careful stock selection based on intensive research remains the key driver of long‑term performance as individual emerging markets countries and companies continue to show wide dispersion in their returns.

Additional Disclosures

MSCI and its affiliates and third‑party sources and providers (collectively, MSCI) makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed, or produced by MSCI. Historical MSCI data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast, or prediction. None of the MSCI data is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such.

Important InformationThis material is provided for informational purposes only and is not intended to be investment advice or a recommendation to take any particular investment action. The views contained herein are as of the date written and are subject to change without notice; these views may differ from those of other T. Rowe Price associates.

This information is not intended to reflect a current or past recommendation, investment advice of any kind, or a solicitation of an offer to buy or sell any securities or investment services. The opinions and commentary provided do not take into account the investment objectives or financial situation of any particular investor or class of investor. Investors will need to consider their own circumstances before making an investment decision.

Information contained herein is based upon sources we consider to be reliable; we do not, however, guarantee its accuracy.

Past performance is not a reliable indicator of future performance. All investments are subject to market risk, including the possible loss of principal. All charts and tables are shown for illustrative purposes only.

T. Rowe Price Investment Services, Inc., distributor, and T. Rowe Price Associates, Inc., investment advisor.

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