Where’s that recession investors were told to worry about? So much of the 2023 narrative focused on the notion that earnings would drop off and invite recession. That hasn’t happened so far, but that doesn’t mean that recession risk has actually disappeared. It still looms over the U.S. economy for some key reasons. That should remind investors and advisors of how active investing can navigate big events like recession.
For one thing, the lagging impact of interest rate hikes still hasn’t been fully realized. The Fed raised rates at a very fast pace compared to other hike periods in the modern history of the Fed. That means that there’s still more time needed for the hikes’ impact on factors like the availability of credit to really hit.
What’s more, the yield curve also stands out as an indicator here, in that short-term rates still sit above 10-year Treasury yields. That relationship in which short-term debt offers better returns than longer-term bonds tends to indicate recession risk is high. Sluggish home sales and rising unemployment in specific regions like California round out the reasons to keep recession risk in mind.
Active investing offers some powerful solutions. Active management can respond to a rapid onset of recession better than indexed strategies can. Whereas index funds will bear the brunt of a recession right on the chin depending on which sectors they focus on, actives react. They offer investors and advisors agility on top of talented managers with expertise in a given area.
T. Rowe Price offers active strategies for investors and advisors to consider. Whether focused on income or on growth equities, the shop offers a variety of options from the T. Rowe Price Equity Income ETF (TEQI) and the T. Rowe Price Growth Stock ETF (TGRW).
For more news, information, and analysis, visit the Active ETF Channel.