Inflation has been on the radar as a concern for investors and advisors for at least the last year, but seeing that concern coalesce into an unprecedented reality of historic inflation has created fear within markets as countries begin changing their monetary policies to address it. Strategies that have worked for investors in the last decade or two, particularly passive ones, could be facing challenges in the year ahead.
“For the first time in a long time we’re seeing a different economy, different global, financial and economic outlook where you have this inflation scourge that’s taking over the globe,” said Michael O’Rourke, chief market strategist for Jones Trading, on a recent podcast of Bloomberg Surveillance.
O’Rourke explained that the previous 13 years of monetary policy have generally favored a lower-for-longer approach and created an environment that heavily favored passive investing. During these times of easier monetary policy, market and equity performance was fairly hard to get wrong; pretty much anywhere investors turned, everything was performing strongly.
This environment is changing as the Fed looks to tighten its monetary policy and shrink its budget sheets per the most recent minutes from the Fed meeting in December.
“As far as this year’s concern, I think we’re going through a major secular shift where rates and inflation are going to matter and it’s also going to be fueled by things like deglobalization and decarbonization,” O’Rourke said. “You’re going to need someone to actually be making decisions if you want to navigate what could be a very treacherous 2022.”
Active management is poised to perform favorably in a year that brings Fed tightening, continued COVID impacts, and inflationary pressures. T. Rowe Price, an active management firm, currently offers eight actively managed ETFs with a variety of strategies for investors to align their risk exposures and investment goals.
The firm brings a bevy of experience and research to its products, with portfolio managers averaging over 20 years in investing each, as well as over 400 investment professionals dedicated to researching companies within ETFs.
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