Is the Federal Reserve’s monetary tightening succeeding in slowing down the U.S. economy? A few recent economic reports suggest that the Fed raising interest rates does appear to be having the intended effect.
Stocks and bond yields fell last week after the ISM Manufacturing and Services Indices both came in weaker than economists had forecasted, and job openings data showed a big drop in hiring. Job openings fell below 10 million in February for the first time in nearly two years, according to the Labor Department’s monthly Job Openings and Labor Turnover Survey. Prior to the release of the JOLTS data, Wall Street analysts had estimated about 10.4 million, according to FactSet.
LPL Financial’s chief economist Jeffrey Roach is quoted in CNBC as saying: “As the economy slows, firms will likely cut openings and workers will be less likely to quit in search of better hours and higher pay,” before adding: “The Fed could consider pausing rate hikes at the next meeting but only if the upcoming employment report shows signs of material weakness and the March [consumer price index] report reveals lower inflation.”
With the U.S. economy slowing down, generating substantial alpha will be a challenge going forward. That’s where active management can come into play.
If passive management is like putting your car on autopilot, then active management is giving the manager the ability to grab the wheel. In addition, active managers with greater resources and greater scope benefit from economies of scale, which can often translate to better returns.
“Active managers have the flexibility to take advantage of market volatility and add to favored positions when prices become more attractive,” said VettaFi’s head of research Todd Rosenbluth.
“Active ETFs are really starting to grow and become a more prominent part of the market,” said Tim Coyne, head of ETFs at T. Rowe Price.
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.
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