Inflation looks to be easing up a bit more, defying analyst expectations and boosting investor confidence. The consumer price index rose 0.1% in November after increasing 0.4% in October, while the index increased 7.1% over the last 12 months. These figures are lower than what economists surveyed by Dow Jones were expecting, which were monthly and annual increases of 0.3% and 7.3%, respectively.
“This number today is consistent with the Fed’s target and that’s the first time we’ve seen a number that low in nearly two years,” Paul Ashworth, chief U.S. economist at Capital Economics, told the Wall Street Journal. “So, of course, that’s good news.”
After the Labor Department released the report, stocks rallied, with the Dow Jones Industrial Average gaining 521 points or 1.5%, Tuesday morning. Meanwhile, the S&P 500 gained 2.3% and the Nasdaq Composite went up 3.2%.
“That was a big surprise and markets are reacting accordingly,” Steve Sosnick, chief strategist at Interactive Brokers, told CNBC. “Stocks love the story of a less restrictive Fed and the dollar is weaker which also helps stocks.”
Still, industry observers think that the Federal Reserve will stay on course to raise interest rates by 50 basis points this week.
“Will a CPI number affect the Fed on Wednesday? No… The Fed has baked in 50 for Wednesday and there is no reason to think differently,” wrote Andrew Brenner from NatAlliance Securities.
While the Fed’s decision on what to do about rates this week is unlikely to change, Sosnick said that the lighter numbers could mean the U.S. central bank doesn’t raise rates as high in the future.
“Whether or not it influences Fed policy tomorrow is an open question,” he said. “A reaction like this is potentially saying this number will influence the Fed. If not their rate decision, which is probably 50 basis points, but maybe you get some movement on the outer months.”
With stocks on the rise, while inflation’s coming down, investors may want to be more proactive with their exposure to equities. That’s where active management can come in handy — especially since inflation is still high.
Unlike passive strategies that 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.
“As inflation has slowed some advisors might be inclined to take on additional risk heading into 2023,” said Todd Rosenbluth, head of research at VettaFi. “But with active ETFs, they can benefit from experienced management’s view on whether the macro data is already priced in.”
As part of its lineup of active exchange traded funds, 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 U.S. Equity Research ETF (TSPA ).
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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