Active management helps investors stay on their toes in the current market cycle


THEOver the past week, numerous positive earnings reports were released by some of the major players, and the markets responded by climbing once again. However, looming in the background the specter of inflation, both domestic and global, and a tightening of the supply chain that is about to make holiday shopping extremely difficult, to say the least. we can say.

The Federal Reserve announced its planned cut to the stimulus package that was enacted amid pandemic shutdowns last year, with a plan to be completely free from all financial bond purchases by the summer of the next year. Once that is done, he will then consider raising interest rates from their historic zero rates at this time in order to fight inflation. All of this is happening much faster than the original plan to end the reduction by the end of next year as unemployment and inflation continue to rise.

“The business cycle is moving at breakneck speed,” said Anthony Crescenzi, market strategist for Pimco, in an interview with Bloomberg TV Watch. “We’re probably in the middle of the cycle. Look at the unemployment rate – 4.8%. What is an end of cycle condition? A lower unemployment rate, and that lower rate – full employment – could be reached next year. “

Investors should be careful of the speed of market movements and the recent oscillation, Crescenzi warned. Active management enables the agile responses required in rapidly changing market conditions, allows portfolios to capitalize on upward movements, and helps protect themselves during downturns by responding defensively to passive peers.

“It’s important to be on your guard, it’s important to be active in portfolio management, to think more about stock selection, regional selections,” Crescenzi said.

Markets are starting to build an expectation of rate hikes for next year into their forecasts and prices, but it is not yet clear whether rates will rise soon after the cut ends or if the Fed will wait until 2023. Some strategists believe the banking regulator will shut down, but with prices rising 4.4% in September, the fastest 12-month growth since 1991, Fortune reported, and wages and salaries increasing the fastest in 20 years or more, the potential for cost inflation is a very real possibility.

“The movement of the yield curve reflects this idea of ​​a rapid cycle,” Crescenzi said in the Bloomberg interview. “The yield curve has flattened again recently and that’s something that happens later in the cycle as the Federal Reserve raises the short-term rate.”

Active management firm T. Rowe Price believes in the difference and benefits of active investing and active management as it strives to provide investors with risk-adjusted returns. The company currently offers eight actively managed ETFs with a variety of strategies for investors to align their risk exposures and investment objectives. The company brings a wealth of experience and research to its products, with portfolio managers averaging over 20 years of investment each, as well as more than 400 investment professionals dedicated to researching companies within ETFs.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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