Signals of ongoing weakening within the manufacturing sector sent stocks tumbling on Tuesday, September 3. As market sensitivity to economic data continues, investors would do well to consider active strategies amidst ongoing volatility.
August’s ISM purchasing manager’s index reported below expectations, at 47.2% on an expected 47.9%, according to CNBC. Though the index gained from July’s 46.8%, it remains in contraction territory (below 50%).
“Demand continues to be weak, output declined, and inputs stayed accommodative,” Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee, told CNBC.
A weak reading last month also resulted in a market decline of up to 8.5% for the S&P 500, though broad benchmarks largely made up the losses. Ongoing manufacturing weakness lends further credence to the likelihood of a Fed interest rate cut later this month. However, ongoing economic signals indicating weakening, while supportive of rate cuts, create the potential for further volatility as investor concerns turn to potential recession.
Invest for a Dynamic Market Environment With Active Strategies
Market volatility rose over the summer months as recession fears spiked once more in July on a weak PMI reading alongside the rapid unwinding of the Japanese yen carry trade. A second consecutive month of PMI contraction, albeit better than July’s, could exacerbate ongoing volatility. Add in the short-term impacts of the U.S. election in November and ongoing geopolitical tensions, and the possibility for prolonged volatility remains notable.
See also: 3 Strategies for More Selective Portfolio Construction
This environment potentially favors active ETFs. Actively managed strategies may offer diversification benefits, risk management, and potential outperformance over indexed strategies. A dynamic market environment of prolonged volatility may also favor the flexibility of an active strategy as managers respond to changing tides within asset classes.
Investors would do well to consider increasing their active exposures headed into the fall months. Natixis offers several actively managed ETFs for investors seeking to capture evolving opportunities. These include the Natixis Loomis Sayles Focused Growth ETF (LSGR ), a high-conviction strategy within U.S. growth stocks, and the Natixis Gateway Quality Income ETF (GQI ). GQI is an income-focused fund that offers exposure to high-quality U.S. companies alongside an options overlay strategy.
The firm also offers the Natixis Vaughan Nelson Select ETF (VNSE ), a high-conviction strategy for U.S. large-cap companies currently undervalued for their assets, dividend yield, and earnings growth.
For more news, information, and analysis, visit the Portfolio Construction Channel.
