Inflation has been on the radar as a concern for investors and advisers for at least last year, but seeing this concern melt into an unprecedented reality of historic inflation has created fear in the markets as the countries are starting to change their monetary policies to deal with it. The strategies that have worked for investors over the past ten or twenty years, especially passive strategies, may face challenges in the coming year.
“For the first time in a long time, we are seeing a different economy, different global, financial and economic perspectives where you have this scourge of inflation taking over the world,” said Michael O’Rourke, chief market strategist for Jones Trading, on a recent Bloomberg Surveillance podcast.
O’Rourke explained that the previous 13 years of monetary policy have generally favored a weaker-for-longer approach and created an environment that has strongly favored passive investing. In these times of easing monetary policy, it was quite difficult to go wrong about the performance of markets and stocks; pretty much everywhere investors have turned, everything has gone well.
That environment is changing as the Fed seeks to tighten monetary policy and cut budget sheets according to the final minutes of the Fed meeting in December.
“Regarding this year’s concern, I think we’re going through a major secular shift where rates and inflation are going to matter and which will also be fueled by things like de-globalization and decarbonization,” he said. O’Rourke said. “You will need someone to make decisions if you are to navigate what could be a very dangerous year 2022. “
Active management is poised to perform favorably in a year marked by Fed tightening, continued impacts of COVID 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 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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