Big tech is undergoing sweeping layoffs amid fears of an impending recession. After Facebook parent Meta announced in November it would be cutting 11,000 jobs, Microsoft and Amazon said this month they were laying off 10,000 and 18,000 employees, respectively. And on Friday, Google revealed it was reducing 12,000 people from its workforce.
It’s been a bumpy ride for tech firms. While the S&P 500 ended 2022 down 20%, the tech-heavy Nasdaq Composite dropped 34% for the year. Meanwhile, tech giants like Microsoft, Google parent Alphabet, and Amazon saw their stock prices fall 28%, 39%, and 51% for the year, respectively.
These firms are flying in the face of multiple headwinds, from rising interest rates to persistently high inflation. In particular, the Federal Reserve’s aggressive stance on raising interest rates to curb high inflation has soured investors on U.S. tech stocks. And with many expecting a recession in 2023, this has put pressure on these companies to make sizable cuts to their staff.
“The job cuts in tech land are piling up, as companies that led the 10-year bull market adapt to a new reality,” according to CNBC. “The layoffs come in a period of slowing growth, higher interest rates to battle inflation, and fears of a possible recession next year.”
With fears of a recession looming over investors (and large tech firms), it may make sense to have a steady hand at the wheel of some clients’ investments. That’s where active management can come into play.
While passive strategies lack the flexibility to adapt to changing market environments, active ETFs can offer the potential to outperform benchmarks and indexes. Plus, active managers with greater resources and greater scope benefit from economies of scale, which can often translate to better returns.
“Company fundamentals regularly shift, and skilled managers of active ETFs are able to adjust the portfolio to reflect what is likely ahead,” said Todd Rosenbluth, head of research at VettaFi. “Index based ETFs must continue to hold on to shares of companies facing operational challenges.”
As part of its lineup of active exchange traded funds, T. Rowe Price offers a suite of actively managed fixed income ETFs, including the T. Rowe Price QM U.S. Bond ETF (TAGG), the T. Rowe Price Total Return ETF (TOTR), the T. Rowe Price Ultra Short-Term Bond ETF (TBUX), and the T. Rowe Price U.S. High Yield ETF (THYF).
“When things are going sideways, that’s where active managers can alleviate some of the burden from the investor,” said Neil E. Kays, senior product marketing manager at T. Rowe Price.
T. Rowe Price has been in the investing business for over 80 years, conducting field research firsthand with companies, utilizing risk management, and employing a team of experienced portfolio managers carrying an average of 22 years of experience.
For more news, information, and analysis, visit the Active ETF Channel.
