Active ETFs Can Navigate Inflation Data This Week | ETF Trends

Hear that? That’s the sound of yet another inflation report arriving this week for markets to chew on. With so much of the Fed’s thinking, and thereby the fate of the Fed funds rate, tied to CPI data, each report takes on more importance. Markets will be watching whether rates come in above or below expectations, inviting investors to revisit active ETFs.

Which indicators exactly are arriving this week? The consumer price index (CPI), producer price index (PPI), and retail sales data will drop this week. Each offers a slightly different view into U.S. inflation. The CPI helps to measure metro area consumer services spending, while the PPI eyes prices paid by producers. Not only will those two indicators drop, but retail sales will, too, which offers a broader look at how much consumers are spending.

See more: “Is 2023 the Year of the Active ETF Advisor?

While markets are expecting further inflation drops and a Fed rate hike pause this month, a surprise could change things. If so, ETF investors may want to look to the flexibility inherent in active ETF investing. Active ETF managers not only offer expertise in a given area, but also the ability to respond to a surprise.

In this case, should inflation come in hotter than expected and add yet another rate hike, it could throw markets for a loop. While index funds would have to take that on the chin, active strategies can adjust within their investment areas.

Where, then, should investors look in active ETFs? T. Rowe Price has a suite of active ETF investing options. Those strategies offer exposure to areas like bonds, equity income, and dividends. Investors can consider strategies like the T. Rowe Price Dividend Growth ETF (TDVG) and the T. Rowe Price Ultra Short-Term Bond ETF (TBUX) in that list.

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