Economic growth in the U.S. slowed in the first quarter more than analysts expected as high interest rates and stubbornly high inflation caused consumers to adopt a gloomier outlook towards the future.
GDP growth grew at an annual rate of 1.1% in the first quarter of 2023. The rate of growth has slowed down from the previous quarter, as real GDP increased 2.6% in the fourth quarter of 2022. Economists surveyed by Reuters had expected 2% growth for the quarter.
LPL Financial’s chief economist Jeffrey Roach is quoted in CNBC as saying that the “U.S. economy is likely at an inflection point as consumer spending has softened in recent months,” before adding that “consumers are getting more pessimistic about the future.”
Since the collapse of Silicon Valley Bank and the subsequent banking crisis, credit conditions have tightened, putting the squeeze on consumers. Added to that, inflation is still well above the Federal Reserve’s target of 2%. The U.S. Bureau of Economic Analysis attributed the quarterly uptick to an increase in consumer spending that was partly offset by a decrease in inventory investment.
The Federal Reserve has increased the federal funds rate by 475 basis points through nine consecutive rate hikes since last March to its current range of 4.75%–5.00%. The U.S. central bank is expected to raise interest rates by another 25 basis points next week.
These recent economic data tie in with analysts’ consensus that the U.S. is headed towards a recession (albeit a mild one) later this year. In uncertain times like this, investors may want to consider having some actively managed ETFs in their portfolios.
Active ETFs can be a valuable tool for investors seeking alpha during volatile or bear markets by enabling investors to adjust their portfolio holdings in response to changing market conditions. They can also help investors build a diversified portfolio that’s better suited to their investment goals and risk tolerance, and potentially generate higher returns over the long term than passive ETFs.
As part of its lineup of active ETFs, T. Rowe Price offers a suite of actively managed equity ETFs, including 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 ).
“Active managers can reposition the portfolio toward favored names when they are temporarily trading at lower levels,” said VettaFi’s head of research Todd Rosenbluth.
T. Rowe Price has been in the investing business for over 80 years and conducts field research firsthand with companies, utilizing risk management and employing a team of experienced portfolio managers carrying an average of 22 years of experience.
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