One of the world's largest wealth management houses gives its views about markets, with a strong Asian focus.

Stock markets recovered rapidly after tumbling in the latter part of 2018 but there are more potential wobbles from escalating trade disputes and political populism, T Rowe Price, the asset management house, has said.

While the direct impact of tariffs on economics and earnings growth appears manageable at the moment, the secondary effects on business confidence, capital spending and hiring could diminish hopes for a second-half earnings rebound, Rob Sharps, head of investments and group chief investment officer, said. “I don’t think that’s likely, but it certainly is a possible outcome.”

The firm, which is cautiously optimistic on the global economy and markets, says the strength of the Chinese economy is a major driver of growth and one of the few countries with much room to change policy either on the central banking or tax-and-spend front.

“If there’s one thing that would make us change our generally cautious stance on global growth, it would be if China increases stimulus again,” Justin Thomson, portfolio manager and chief investment officer, equity, at the firm, said.

T Rowe Price, with $1.07 trillion of assets under management at the end of May, is one of the world’s largest asset managers. It is bullish on emerging market stocks and says investors can find bargains with a long-term view in Japan. Elsewhere in the Asia-Pacific region, it expects some tests for markets in Australia

The most prominent risk investors must consider is a trade war between China and the US. With President Donald Trump facing re-election in 2020, he may want to put off any agreement until 2020, while China might want to deny him a trade success to damage his chances of another term, allowing Beijing to negotiate with his successor.

“There seems to be a resolve in the US to reject a deal with China that would be perceived as weak. As such, there may be more pain before we reach a point where there is a greater sense of urgency,” T Rowe Price’s Sharps said. “A lot depends on a resolution of the trade war and on the emergence of green shoots of improving global economic and earnings growth. If we get those things, we could see the US equity market make new highs. If not, expectations for 2020 clearly will need to come down.”