With April arriving and still no rate cuts, investors might be asking when the Fed may act. A third of the year has passed, but despite markets previously anticipating several cuts, increasingly it appears rates may hold. With just eight months of the year left, one or two cuts now appear more likely. As such, investors may want to revisit active ETFs as a strong option in the interim.
See more: 3 Standout Small/Midcap Stocks in Active ETF TMSL
This Wednesday, investors will receive new data via the consumer-price index (CPI) update dropping. Further inflationary cooling would of course boost the case for cuts. However, with the economy so hot, the Fed may not see the need for those cuts.
The pull and push of market expectations about rate cuts, whether rate cuts are already priced in, and what that all means for the economy speaks to the need for a flexible, seasoned investment approach. That’s where active ETFs can step up.
Active strategies of course come in all varieties, but their shared attribute — flexibility — helps them all. Active managers don’t have to follow staid indexes; they are able to react to events and deeper, bottom-up stock data more quickly. Big index-tracking passive funds may have yet to adjust for fewer rate cuts. Active managers, by contrast, can do so more quickly.
What’s more, whereas certain firms’ stock prices may have inflated due to anticipated rate cuts, active strategies can help find more durable opportunities. Firms with strong fundamentals, as assessed by seasoned active management teams, could perform despite the lack of cuts.
T. Rowe Price offers a variety of active strategies that may appeal amid a dearth of rate cuts. For example, investors may want to consider a strategy like the T. Rowe Price Capital Appreciation Equity ETF (TCAF).
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