Why T. Rowe Price’s Iona Dent believes it’s not time to leave the equities party yet

James Marlay (0:03)

Today on The Rules of Investing podcast, I'm talking with Iona Dent, Associate Portfolio Manager for the Global Growth Equity Strategy at T. Rowe Price. Now, if you've taken a look at global equity markets lately, you might be feeling a sense of deja vu. With tech valuation soaring, retail speculation bubbling, and an AI boom drawing billions in capital expenditure, seasoned investors are asking if we've traveled back in time to 1998 or 1999

Now, today I'm asking Iona how she's navigating a market that feels increasingly like a bubble without leaving the party too early. We'll dive into where the big AI dollars are actually flowing, why high beta speculative trades are creating dislocations, and how T. Rowe Price is balancing growth with strict valuation discipline across global markets. And stick around as Iona shares what she believes the market has wronged today, and the stock she'd be happy to own if markets were to close for the next five years. My name is James Marlay, and this podcast is brought to you by Livewire Markets, and Iona, very nice to have you on The Rules of Investing. Thanks so much for your time.

Iona Dent (1:09)

Thank you guys very much for having me. Great to be here.

James Marlay (1:12)

Before we jump into our topics, could you perhaps introduce the audience just to T. Rowe Price? It's a behemoth firm, but maybe just a quick bit of background so they know who they're hearing from.

Iona Dent (1:23)

Yeah, absolutely. Rowe Price. We're one of the largest global asset managers based in the US. Our headquarters is actually in Baltimore.

We have a history of kind of successful growth investing. We're actually 1.8 trillion of AUM right now, a variety of funds. I work on the Global Growth Fund with Scott Berg and actually have been at the firm over a decade now, which is crazy how time has flown. I started off in our London office back in 2016, spent a good cent there as kind of emerging markets bank analyst and then transitioned on to this fund in 2023 So it's been a great road since then.

James Marlay (2:02)

Awesome. Well, I'm really looking forward to your perspectives today. And I'm sure the firm has incredible visibility of what's going on across global markets. And ahead of this podcast, I had a look through your latest deck. It was a monster, I must add, but super interesting.

But there was a description in there talking about today's market is sort of navigating a bubble in a world of profound change. And as I mentioned in my introduction, drawing some direct comparisons to 1998 and 1999 before we had the.com boom and then bust. But the topic of the moment, of course, is interest rates. We've just had a hike in the US. How are you thinking about rates from an equity investors perspective? And is it important to how you invest?

Iona Dent (2:49)

Look, it's a super timely question. I was actually at the Barclays Financial Conference this week. So meeting a ton of banks, asset managers, insurance companies, alternatives, everything. And of course, it is the topic du jour. I think it's critical once I will spend a couple of minutes on it. I mean, really, my view is why are rates going up? I think that is such a key distinction. Yes, the rate, the direction of rates is higher. Yes, it's more hawkish outlook than we had at the beginning of the year. For example, we've had the first rate hike, as you said, you know, since summer 2023 here. And it was unanimous, 12-0 vote. So that's an important one too, when we have Washington place and, you know, some people thought he might be more dovish. But actually read the statement. I would really encourage everyone to have a quick look at the FOMC statement because it is so important. And why are they raising rates now? Partly because the backdrop is very good. They actually raised GDP growth outlook by 10 basis points. Again, you know, 2.3% this year. They expect GDP growth to accelerate next year to 2.4%.

Unemployment expectations were reduced from 4.3% to 4.1%. So look, the Fed has a dual mandate. There's no denying that inflation is above their target, has been since COVID. So this is kind of an ongoing thing here. My view is that growth is now strong enough that they can prioritize inflation. And that is why we're seeing the heights coming through. So I think it's a pretty healthy backdrop in that respect, let alone the fact that it's just 25 basis point hike here. Where am I paying a little more attention? I would say is the long end of the curve, right? I mean, we have seen the five year and I'm sure everyone's seen it every day on the front page. You know, five years blown out, I'm sorry, the 10 years blown out plus 5%.