Consider Active Management While Inflation Persists

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While the latest Consumer Price Index report suggested inflation may be slowing, not everyone thinks the Federal Reserve has gotten inflation under control — not even members of the Federal Open Market Committee. Pershing Square Capital founder and CEO Bill Ackman has expressed doubts about the US central bank’s ability to return price stability to its target and believes stock prices could remain under pressure as rates remain students.

In a quarterly call with investors on Thursday, Ackman said “long-term interest rates are significantly lower than where they’re going and we think that’s, of course, a risk for equities. “, before adding that he thinks that “inflation is going to be structurally higher in the future than it has been historically.

Ackman continued, “We don’t think it’s likely that the Federal Reserve will be able to bring inflation down to some sort of constant 2% level. We will eventually have to accept a higher level of inflation.

The latest CPI report showed consumer prices rose 0.4% for the month and 7.7% for the 12 months ending Oct. 31, lower than Wall Street estimates. . This gave investors hope that the Fed would be less hawkish when raising interest rates in the future.

But after the report was released, some Fed officials suggested it would be premature to forgo raising interest rates. Federal Reserve Governor Christopher Waller said, “We have a long, long way to go to bring inflation down.” St. Louis Federal Reserve Chairman James Bullard said the U.S. central bank had not done enough to bring inflation down, adding that to “reach a sufficiently restrictive level, the policy rate will still need to be increase”.

The Fed raised the target range for the federal funds rate by 75 basis points this month, marking the sixth consecutive rate hike and fourth increase of 0.75%. The FOMC will meet on December 13 and 14. Analysts expect the US central bank to approve another rate hike, but this time it’s a 50 basis point increase rather than another 0.75% increase.

With inflation expected to remain elevated and the Fed expected to continue raising interest rates, markets can expect continued volatility. This is where active management can help.

While passive strategies lack the flexibility to adapt to changing market environments, active ETFs can offer the potential to outperform benchmarks and indices. Additionally, active managers with more resources and greater reach benefit from economies of scale, which can often result in better returns.

“Active managers have the flexibility to take advantage of market volatility and add favored positions when prices become more attractive,” said Todd Rosenbluth, head of research at VettaFi.

T. Rowe Price offers a suite of actively managed ETFs. T. Rowe Price has been in the investment industry for over 80 years conducting hands-on research with companies, utilizing risk management and employing a host of experienced portfolio managers averaging 22 years of experience .

For more news, insights and strategy, visit the Active ETF Channel.

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