Interest Rate Cuts Could Benefit This Active Growth ETF

The ongoing narrative around the strength of large-cap equities will continue to center around forthcoming rate cuts. Once the Federal Reserve receives the economic data it needs to loosen monetary policy and hit its inflation goal of 2%, it could propel growth-oriented large-cap stocks into the stratosphere.

Technology continues to be the primary momentum driver for the recent stock market gains, and will continue to do so as long as artificial intelligence (AI) remains a key theme for the long-term growth horizon. In the short-term horizon, interest rate cuts will help growth-oriented companies refinance out of their current debt into lower cost debt, thereby reducing borrowing costs to service that debt.

“Low rates are generally favorable for growth stocks as they reduce the cost of borrowing, often needed to finance the expansion of companies,” confirmed a Zacks article published in Yahoo Finance. “Lower rates typically reduce the attractiveness of fixed-income investments like bonds, leading investors to seek higher returns in the equity markets. Growth stocks, with their potential for high returns, become more appealing to investors in this environment, driving up demand and, consequently, their prices.”

All markets are subjected to the laws of physics, and the tech rally that gained steam in late 2023 did eventually pull back. That said, when market volatility strikes, an active management strategy can help investors maintain flexibility in changing market environs.

Level-Up Growth Exposure With Active ETF LGRO

When the market waters get too murky to navigate, that’s also where active management can place the onus on the fund managers and take the burden off retail investors. Active management is inherent in the Level Four Large Cap Growth Active ETF (LGRO).

LGRO incorporates an active concentrated, quality growth strategy with a goal of providing market-beating risk-adjusted performance. Managed with a business owner’s mindset, LGRO invests in high-quality growth companies opportunistically when behavioral inefficiencies create a gap between price and intrinsic value.

Given its strong growth trajectory, especially regarding the aforementioned AI theme, the fund’s sector composition skews toward technology, with almost a 40% allocation. To maintain diversification, sectors the fund invests in also include consumer discretionary and financials.

When looking more specifically at the fund’s top holdings, omnipresent names like Amazon and Apple are certainly there. However, investors get access to other growth-oriented companies that don’t get the :Magnificent Seven” fanfare like Lam Research, which UBS deems a buy.

As such, LGRO is an ideal fund for investors looking to maintain that perfunctory exposure to large-cap growth while also getting nuanced exposure to other companies for added diversification — all encompassed within an actively managed fund for a higher degree of flexibility.

For more news, information, and analysis, visit the ETF Building Blocks Channel.