Benchmark Dispersion Provides Opportunities for Active Management To Shine

Sometimes a rising tide does not lift all boats. Despite the S&P 500 gaining 8% in October, some of its biggest names experienced sharp selloffs in response to disappointing earnings figures, including Microsoft, Alphabet, Amazon, and Facebook. With stark differences between individual stocks emerging, benchmark dispersion surged to an annualized 36%, the highest since March 2020.

“It is unusual to see index volatility rise in an ‘up’ month, but whipsaw reactions to anticipated changes in tone from the Federal Reserve saw the S&P 500 clock in several outsized days of gains and losses,” according to S&P Dow Jones Indices. “Index volatility rose to 28%, although we were spared a triumvirate of increasing risk measures as correlation ticked down slightly.”

Such an environment where benchmark disparity is high allows active managers to distinguish themselves through their stock-picking abilities.

“The wide spread between mega-cap growth stocks in October and throughout the year and more moderately sized high-quality stocks highlights the potential for active management,” said Todd Rosenbluth, VettaFi’s head of research. “The opportunity for stock picking has been stronger in 2022 than in recent years past.”

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 investing business for over 80 years through conducting field research firsthand with companies, utilizing risk management, and employing a bevy of experienced portfolio managers carrying an average of 22 years of experience.

Neil E. Kays, senior product marketing manager at T. Rowe Price, explained that if passive management is like “putting your car on autopilot,” then active management is giving the manager “the ability to grab the wheel.”

“In the current market environment, having an active manager that can pivot is key,” Kays added.

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