Stocks surged while Treasury yields plunged after the latest consumer price index report showed that inflation slowed in October.
The CPI report released Thursday showed that consumer prices rose 0.4% for the month and 7.7% for the 12 months ending October 31. And while that means inflation is still up, the rate of increase was slower than economists expected. Some investors see this as a sign that inflation has peaked and that the Federal Reserve may pivot from its hawkish path toward raising interest rates.
Tim Courtney, chief investment officer of Exencial Wealth, is quoted by CNBC as saying that "interest rates are still running everything in markets. With today’s CPI number coming down, the market is now betting pretty clearly that they think the interest rate [rises] are coming close to an end. So, you see those interest rate sensitive stocks doing really, really well.”
At one point on Thursday, the Dow Jones Industrial Average gained more than 1,000 points, or more than 3%, its biggest one-day gain since 2020. The S&P 500 rose more than 4% at one point during midday trading, and the Nasdaq Composite soared 6%, also its biggest gain since 2020.
Meanwhile, the 10-year Treasury yield fell more than 18 basis points to 3.946%, and the yield on the 2-year Treasury dropped more than 23 basis points to 4.395%.
Inflation is still high, stock and bond markets are still volatile, and the Fed has still made no indication that it plans to change its course of action (not to mention the U.S. dollar dropped to its worst day since 2015). So, investors still looking to invest in quality assets designed to deliver strong returns over the long run may want to consider an actively managed approach.
While passive strategies lack the flexibility to adapt to changing market environments, active ETFs can offer the potential to outperform benchmarks and indexes. Plus, 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 Todd Rosenbluth, head of research at VettaFi.
T. Rowe Price offers a suite of actively managed ETFs. 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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