Using Active Management to Brace for the Debt Ceiling Fight

The U.S. has until June 1 to either raise or suspend the debt ceiling before the country goes into default. President Joseph Biden and House Speaker Kevin McCarthy have expressed confidence that a deal will be made in time. However, neither party has made progress in reaching an agreement.

While it’s not exactly clear what will happen if the U.S. government defaults on its debt, everyone agrees that the results would be catastrophic. It would create shock waves throughout markets, leading to a recession and irreparable damage to the U.S.’s role in the global economy.

“Stocks, corporate debt and the value of the dollar would probably plummet,” wrote Joe Rennison for the New York Times. “Volatility could be extreme, not just in the United States but across the world.”

While many industry experts also believe that the odds of defaulting are low, the brinkmanship can still rattle markets. So, in times like this, investors may want a steady hand guiding their investments through uncharted waters. That’s where active management can help.

See more: “Stocks Bounce as Investors Expect Debt Ceiling Deal

Looking at the Road Ahead

Active ETFs can be a valuable tool for investors during prolonged periods of market volatility or protracted economic downturns. While passive funds drive by looking in the rearview mirror, active strategies look through the windshield at the road ahead.

However, only a handful of active managers can provide alpha, regardless of market conditions. Active managers with greater resources and greater scope benefit from economies of scale, which can often translate to better returns.

“Active managers have the flexibility to take advantage of market volatility and add to favored positions when prices become more attractive,” said VettaFi’s head of research Todd Rosenbluth.

As part of its lineup of active ETFs, T. Rowe Price offers a suite of actively managed equity ETFs, including the T. Rowe Price Blue Chip Growth ETF (TCHP), the T. Rowe Price Dividend Growth ETF (TDVG), the T. Rowe Price Equity Income ETF (TEQI), the T. Rowe Price Growth Stock ETF (TGRW), and the T. Rowe Price US Equity Research ETF (TSPA).

T. Rowe Price has been in the investment business for over 85 years. The firm conducts field research firsthand with companies, utilizing risk management and employing a team of experienced portfolio managers carrying an average of 16 years of experience.

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