It’s a big week for markets, with key earnings reports from big names like Alphabet (GOOGL) and Microsoft (MSFT) arriving. Perhaps even more important than earnings reports from so-called “Magnificent Seven,” however, are jobs numbers. Jobs numbers may be the key determinant of the Fed’s next moves around rates. Whatever the case, the back and forth presents a strong use case for active ETFs.
Yes, inflation data has cooled. On a seasonally-adjusted basis, annualized consumer price inflation, not including food and energy items, has fallen to 1.86% as of December. According to this chart cited in the Wall Street Journal, that brings that metric back down to where it was in Fall 2020.
Despite success on that front, however, Fed action may wait for restrictive rates to demonstrably impact the real economy. In a somewhat remarkable display, the U.S. economy grew 3.3% annualized in the fourth quarter. Once again, the Fed may be waiting on key data points to act, but in this case, it’s jobs numbers.
The Case for Active ETFs
As with waiting on inflation data, active ETFs can prove a worthwhile investment with good or bad jobs data. While waiting for an eventual boost from rate cuts – which still seem much more likely than not – active ETFs can still boost portfolios right now.
Active management allows managers to look for outperformance, honing in on areas with upside while avoiding areas that may be slowing down more. Active management also tends to lean on fundamental research more, for example, rather than sticking to broad sector-based tracking. With a new jobs report dropping on February 2nd, active ETFs and their managers can react with positive or negative news.
T. Rowe Price offers a host of active ETFs like, for example, the T. Rowe Price Growth ETF (TGRT ). For investors looking to prepare for some key data drops to start 2024, active investing may provide one strong option.
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