Was this week’s big tech dip a blip or a sign of things to come? Huge tech names have relied heavily on AI entering the year, helping to avoid an earnings issue to start 2024. That being said, however, high rates, even with a few cuts coming, may stand out as a headwind. For whatever reason, tech stocks dropping could speak to the case for active investing ETFs.
See more: Tired of Market Narratives? This Active ETF Can Help
The Nasdaq 100 Index, which includes some of the largest non-financial firms on the Nasdaq overall, had its toughest week in months last week per YCharts. It dropped from 20398 to a low of 19522 between July 16th to July 19th last week.
The potential cause for that drop remains unclear. Political chaos related to the U.S. elections abounds, throwing off investors. Doubt about rate cuts could also pose a headwind, or perhaps a dropoff for tech indicates concentration risk fears coming true as AI disappoints.
Whatever the case, active investing could provide a helpful set of tools for investors to adapt. Active ETFs can adapt more quickly than passive, indexed strategies. For example, a broad active equity strategy can adapt if tech firms do take a hit. At the same time, if the Fed cuts interest rates this Fall, smaller firms could benefit, with an active strategy able to identify standouts in the small-cap space.
The T. Rowe Price Capital Appreciation Equity ETF (TCAF ) presents one option, primarily investing in U.S. large-cap options. Managed by David Giroux, and charging 41 basis points (bps), the active investing strategy holds about 100 firms but retains flexibility to invest across market caps. For those investors looking at their options following the recent tech dropoff, active investing may appeal.
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