T. Rowe Price Favors Short-Duration Fixed Income Amid Inflation Risks

Vincent Chung, a co-head portfolio manager at T. Rowe Price Group, said markets may be underestimating the risk that inflation becomes more persistent as global manufacturing activity recovers and raw material costs continue to rise. According to Jin10, Chung wrote in a report that while investors are still counting on productivity gains from artificial intelligence to offset inflationary pressures, those benefits may take time to materialize. He added that as markets reassess the outlook for growth, inflation, and interest rates, they may face a period of volatility. In this environment, Chung said he prefers shorter-duration fixed-income assets, including high-quality global high-yield bonds and some emerging-market credit. He also said inflation-linked bonds can serve as an important tool for portfolio diversification.