Markets have responded very positively to last week’s U.S. election result, lifting the S&P 500 (SPX) to a multi-year high. Per YCharts, the key market index has surged to almost 6000, having entered 2024 at around 4740. That rolling market surge could be poised to continue even towards the new year, but it may not be as straightforward as owning SPX. Indeed, it may be worth considering how active investing can help investors get the most juice out of the market rally, while watching out for downside.
See more: Active Blue Chip ETF TCHP’s Case for the Rest of 2024
Why look to active investing? While the market spike may owe a lot to elections, part of it certainly stems from rate cuts. A third rate cut last week certainly boosted the equities outlook for many investors, but rate cuts don’t impact companies evenly. While cuts may help their AI efforts, many large-cap names already dominate portfolios. Instead, rate cuts may provide a bigger boost to small- or midcap firms.
Post-Election Glow Speaks to Active Investing
At the same time, the post-election excitement, relying on a future Trump administration’s policies, may see very uneven benefits in reality. Tariffs could harm some firms more than others. At the same time, certain clean energy investing areas could struggle as a new administration looks to fossil fuels. Finally, should the coming administration up the ante on China and chips, many other tech areas could struggle.
Active investing can help managers navigate those uneven impacts and get more oomph out of upside. Where many passive funds must stick to certain weight or diversification requirements, active funds, looking to fundamentals, can lean into specific stocks more. An active growth ETF can offer such a focus on growth to potentially outperform the markets amid this swing. With active investing in ETFs also offering tax efficiency, and many investors looking to tax-loss harvest, active ETFs can provide an appealing set of options to refresh their portfolios.
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