Volatile Markets Provide ETF Opportunities for Active Investors

As volatility continues to pummel markets, this could be a good time for long-term investors to buy in, especially for active ETF strategies. This is because when investors are most bearish on stocks, the market has already reflected the potential damage to earnings. The S&P 500 is already down over 20% from its all-time high in January as much of the selloff has already occurred.

Lori Calvasina, chief U.S. equity strategist at RBC, wrote in a note that “deeply depressed sentiment makes the best case for stocks, and that argument has strengthened.”

Just because stocks are down now doesn’t necessarily mean investors should go in on a buying frenzy. The past isn’t a prologue, and while bear markets have historically become bull, this time could, of course, be different.

“Don’t forget that stock prices have reset to lower levels for a reason. The market needs to see the full impact of higher rates on the economy,” wrote Jacob Sonenshine at Barron’s. “Third- and fourth-quarter earnings should reveal that impact to profits over the next few months through the start of 2023. Plus, markets still need to see that Fed will actually slow down the pace of rate hikes.”

While the market is likely to continue enduring some short-term pain, Sonenshine argues that “buying a few shares of promising companies now could pay off over a longer time frame.” Of course, it could help to have an active manager help choose which stocks to invest in.

While passive strategies lack the flexibility to adapt to changing market environments, an active ETF can offer the potential to outperform benchmarks and indexes.

“Active managers have the flexibility to take advantage of market volatility and add to favored positions when prices become more attractive,” said Todd Rosenbluth, head of research at VettaFi.

As part of its lineup of active ETFs, T. Rowe Price offers the T. Rowe Price Blue Chip Growth ETF (TCHP), the T. Rowe Price Dividend Growth ETF (TDVG), the T. Rowe Price Equity Income ETF (TEQI), the T. Rowe Price Growth Stock ETF (TGRW), and the T. Rowe Price US Equity Research ETF (TSPA).

T. Rowe Price has been in the investing business for over 80 years through conducting field research firsthand with companies, utilizing risk management, and employing a bevy of experienced portfolio managers carrying an average of 22 years of experience.

For more news, information, and strategy, visit the Active ETF Channel.