Investors were steering clear of growth as 2022 wore on, particularly in the tech sector, where weakness manifested itself in the Nasdaq 100 falling 28%. However, investors are leaning back into growth stocks again, opening opportunities for exchange traded funds (ETFs) to situate themselves in investors’ portfolios.
“After a historic run, growth stocks finally hit a wall. The market’s willingness to pay handsomely for promises of future profits began to decline in 2021, but the party truly ended in 2022,” wrote Adam Sabban in a Morningstar article discussing funds that are taking a look at struggling growth stocks.
“Slowing economic growth, higher interest rates, and soaring inflation led investors to dump many stocks that could do no wrong 12 months earlier,” Sabban added.
With the expectation that the U.S. Federal Reserve will slow down the pace of its rate hikes, investor sentiment is improving thus far in 2023. As such, investors are re-adding risk to their portfolios, including growth stocks that can capture upside in a comeback performance after a tumultuous 2022 — this is especially the case when it comes to active managers looking for value.
“The crash was painful for some active managers, while for others it vindicated their avoidance of high-flying companies,” Sabban wrote. “But there were also funds that saw it as an opportunity.”
Get Active Growth Exposure
Investors who want exposure to growth’s upside potential can tap into the T. Rowe Price Growth Stock ETF (TGRW), which uses active management to locate opportunities in the current market landscape. With TGRW, investors can get exposure to household names in the tech sector as well as other such opportunities while mitigating risk.
In a time where inflation is still a wild card in the current market, getting active management is a must. The technology sector, in particular, will require expert management to select the best stocks to weather a potential storm.
Investors must keep in mind that growth stocks are also about seeing the forest for the trees. Playing the long game is necessary despite the recent weakness in the tech sector.
“Buying when others are rushing to sell has typically been a prudent long-term move,” Sabban wrote.
TGRW invests in growth names that exhibit one or more of the following characteristics: strong cash flow and above-average earnings growth, the ability to sustain earnings momentum in economic downturns, occupation of a niche in the economy, and the ability to expand during times of slow economic growth. Additionally, TGRW is able to deliver this actively managed strategy with an expense ratio of only 0.52%.
For more news, information, and analysis, visit the Active ETF Channel.