Inside the New Market Era: Lessons from Sébastien Page

Making investment decisions under ongoing uncertainty continues to be inherently challenging for the industry. However, understanding the importance of how information is framed, and how it can significantly influence decision-making is crucial for better decision-making.

This was the central view expressed by Sébastien Page, Head of Global Multi-Asset and Chief Investment Officer at T.Rowe Price, in his keynote presentation at the 2025 JANA Annual Conference held in Sydney.

Through interactive hypothetical scenarios with audience participation, Page demonstrated that decision-making in uncertain conditions requires careful consideration of how information at their disposal is being framed. The hypotheticals used were based on research by Daniel Kahneman in the early 1980s, work that ultimately earned him a Nobel Prize.

“Every time you look at CNBC, every time you listen to a market strategist, there is framing involved. Decision-making under uncertainty is super hard because we don’t know the future,” Page explained.

“It’s even more complicated than my hypotheticals suggest. For example, people will show you different data or parts of the data to favour a certain framing to make their point.”

He delved into the current macroeconomic environment, focusing on US inflation, growth and capital markets, presenting both optimistic and pessimistic frames for inflation and growth. Page encouraged the audience to recognise the framing used in financial information and strategy research and understand the outcomes of the framing effect. In doing so, investors will be better placed to make well-considered decisions.

Consider US inflation

To illustrate his point, Page used the example of US inflation, framing it both from a pessimistic and optimistic frame. The pessimistic frame could take the position that commodities prices are highly unpredictable and can drive inflation surprises.

“Where commodities prices are right now, with oil looking maybe closer to a bottom than a top [and] with some metals rallying, the risk is to the upside,” Page shared.

“And wages in the US are running at 4% year-over-year. That is hardly consistent with 2% inflation.”

Persistent inflation pressures are being reinforced by a US housing shortage, which is keeping shelter inflation sticky, while tariffs are mathematically set to push prices higher.

So what about the optimistic frame?

“Inflation might be coming down. We were at 9% year-over-year, now we’re at 2.7%. So the trend is our friend and the Federal Reserve is telling us inflation might be coming down,” said Page.

Housing data is down four months in a row, suggesting that the shelter component of US inflation is going to contribute to an inflation figure closer to the 2% target. Tariffs, while large by historical standards, only apply to 9% of US GDP, and services remain a significant part of the inflation basket.

As it happens, the pessimistic frame is the one held by T. Rowe Price’s asset allocation committee.

“We are underweight long-term treasuries in our portfolios. We have a long position in real asset equities, so metals and mining, utilities and energy companies and real estate companies. So we have an overweight position there as a hedge for a pop in inflation,” said Page.

Growth outlook

Turning to economic growth, he pointed out that nominal calendar GDP growth for the US has been decelerating – which could support a pessimistic frame of thought.

“If I want to be pessimistic, US unemployment is up from the bottom by 80 basis points. There is no time in history when we’ve had such a rise in unemployment that hasn’t ended in a recession.

“Besides, growth is slowing. The consensus 2025 GDP forecast for the US was at 2.2% a couple of months ago – and now it’s at 1.6%. The US Manufacturing PMI in the US is at 48, and any number below 50 shows a contraction,” said Page.

An optimistic frame, which T. Rowe Price favours, would recognise that the US consumer remains strong with unemployment at 4.2%, still comfortably below the long run average of 5.7%. Sebastian noted that 80% of consumption in the US comes from the top 50% of wage earners. These people also often own stocks and have therefore benefited from rising equity markets, contributing a ‘wealth effect’ that further supports consumption.

Additional factors to consider include expected growth spending on artificial intelligence (AI) and fiscal support provided by the One Big Beautiful Bill Act.

T.Rowe Price’s view on economic growth reflects its current neutral position between stocks and bonds in its tactical asset allocation.

“At a 22 price to earnings ratio, we’re in a situation where [economic fundamentals are] all priced in, or even dare I say, priced for perfection,” Page said.

“Good fundaments against very high valuation – we think it balances out and we’re going to be neutral. We are also long diversification.”

Are Equity Markets in a Bubble?

Growth in AI spending is a major driver of optimism in the US, with data showing that AI capital expenditure is now contributing more to GDP growth than consumer spending. Any belief that DeepSeek’s low-cost model would deflate the AI bubble has been curtailed by continued investment by hyperscalers (like Microsoft, Amazon and Alphabet). This investment is driving real productivity gains.

“If you want a pessimistic frame, though, look at their free cashflows. There’s a reason to worry when those companies start spending more than they’re generating in free cash flows and we’re seeing an inflection point,” Page said.

This concern is heightened by signs of market exuberance.

“Goldman Sachs speculative trading index is at an all-time high. The market is up 30% in four months. Crypto is rallying. It feels frothy,” Page said.

Still Page also points out that while the S&P500 price-to-earnings ratio is very high by historical standards, “margins have increased steadily and they’re almost double the margins of the early 1990s.”

Globally, average stock valuations are near long-term norms, with small and mid-caps in the lower range and non-US stocks trading at reasonable valuations.

“And that’s why, in our tactical portfolios, we’re long non-US stocks relative to the US. I’m not calling for the end of US capitalism. [But] if you look at Europe, for example, you’ll see that banks are trading at around 1-1.3 price-to-book ratio, versus 2 before the financial crisis.”

Ultimately, said Page, decision-making under uncertainty is the job definition for investment managers. It’s even more complicated in today’s world because of the abundance of data that can be interpreted in different ways.

Looking forward: JANA’s approach to navigating the new market era

At JANA, we recognise that investment decisions are always made under uncertainty. Today’s environment, which is marked by an evolving geopolitical policy backdrop, persistent inflation risks, slowing but resilient growth, and elevated valuations, demands careful analysis of information and disciplined decision-making.

Looking ahead, we expect inflation to remain above central bank targets for longer than markets currently anticipate, supported by persistent wage growth and supply constraints. While growth is moderating, the US and Australia continue to show resilience, though both face ongoing policy and global headwinds. Valuations – especially in US equities – are elevated, but we do not see clear evidence of a broad market bubble. Rather, we observe pockets of exuberance alongside areas of reasonable value.

Economies and investment markets continue to evolve in the post-COVID era, moving away from the ultra-low inflation and interest rate environment that defined the past decade. This transition brings greater uncertainty and the potential for more frequent market dislocations but also creates new opportunities for active investors.

We believe that flexibility, a focus on true diversification, and a willingness to challenge established assumptions will be critical to navigating the new market era and delivering sustainable outcomes for our clients.