Is the tech explosion that has driven so much growth this year running out of steam? Microsoft (MSFT), even with better-than-expected results, saw its stock drop. Meta (META), too, saw its stock price fall following news that it expects higher capital expenditures next year. While it’s far, far too early to make a call on a broader drop in tech, disappointing tech earnings may give investors pause. It may also remind investors of the potential of active tech investing.
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Active tech investing could appeal if tech earnings continue to disappoint. Passive funds have significant tech allocations, of course. That has benefitted your average investor, but the lack of flexibility could see those funds fail to adapt quickly. If, for example, the Fed puts repeated pauses on rate cuts, that could spook tech investors. While a soft landing has led the narrative race this year, and it seems more likely than ever, it’s still not locked in.
What’s more, many active tech ETFs offer a fundamentals-driven approach that can identify outperformance in tech names. That could both benefit from a tech overperformance or a tech slowdown by picking out durable names that meet fundamental screens. Especially in a day-to-day environment like earnings season, or, say, an election season, that could prove a key differentiator.
Ahead of 2025, too, it may be worth making a broader move into active ETFs. Active investing applies flexibility and combines it with the tax efficiency of ETFs. Not only for tech, but also for areas like fixed income, active investing could help.
In this specific case, however, it’s AI that looms over tech earnings. If AI were to disappoint on all the hype this year, getting an adaptable tech strategy into a portfolio could help. The active tech ETF TTEQ, for example, could provide a solid option. The T. Rowe Price Technology ETF (TTEQ) recently launched and targets tech with T. Rowe Price’s fundamental research capabilities.
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