Despite continuing fears of inflation and geopolitical factors concerning Ukraine, the S&P 500 posted a 5% gain last week. Should the trend continue, investors may want to consider a more dynamic approach using an active management style.
The rally continued despite the U.S. Federal Reserve raising the federal funds rate by 25 basis points. The capital markets may have already priced in that rate hike, causing markets to absorb the news in stride and continue to rally through the trading week.
However, with the Russia-Ukraine conflict still headlining the news in the capital markets and broad news in general, market uncertainty still lurks. How well the economy responds to inflation amid more rate hikes will always percolate in the background as well.
As such, there’s always the threat of volatility in the markets.
“It may stay volatile until Russia gets a little clearer, but underneath this is really good fundamentals,” said Jim Paulsen, chief investment strategist at the Leuthold Group.
S&P 500 Exposure With an Active Approach
To help stave off volatility and be able to shift when the tide turns in the markets, an active management style can help. One exchange traded fund (ETF) to consider maintaining core U.S. equity exposure is the T. Rowe Price US Equity Research ETF (TSPA ).
TSPA essentially puts professionals behind the wheel. Portfolio managers use an active, research-driven process to deliver large-cap exposure with a similar risk and sector profile that closely mirrors the S&P 500.
TSPA aims to seek long-term performance greater than the S&P 500 Index over a full market cycle. The ETF matches this benchmark index in sector and industry allocation then utilizes the S&P’s current structure to guide the weighting, position sizes, and exposure to non-benchmark securities.
One of the key drivers of TSPA is focusing on the fundamentals. TSPA analyzes a company’s overall financial position with data stemming from key finance metrics like return on capital and earnings per share while also maintaining focus on the company’s core business model and market position.
TSPA presents investors with an ideal alternative to maximize gains beyond the S&P 500 through exposure to diversified core equity holdings through ongoing research by a team of dedicated industry analysts, rather than annual index committee selections. Furthermore, the flexibility of an actively managed ETF is available at 34 basis points, which falls below its category average.
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