Stagflation Worries? This Active ETF May Benefit

Is stagflation looming over portfolios? The specter of stagnant growth and persistent, potentially higher inflation offers a dual threat that would certainly spook markets. While that remains just one of myriad potential markets in the next several months, its seriousness invites introspection for investors. Active ETF strategies offer some helpful solutions, with one in particular potentially poised to benefit.

See more: As Official Inflation Data Fades, These ETFs Can Help

How seriously should investors take the prospect of stagflation? While it requires multiple factors worsening to occur, perhaps its bigger challenge is how complicated it can be to beat. Higher growth could fuel more inflation, for example. 

Meanwhile, with the Federal government pressuring the Fed to continue to cut rates, inflationary pressures may continue to persist. That, and further tariffs, could produce a stagflationary quagmire in which portfolios struggle to meet their goals.

That’s where active ETFs can help. Where passive strategies track their indexes with virtually no room for deviation or added boost, active ETFs can add income and chase outperformance. If stagflation does define much of the new year, then, the right active ETF can help portfolios. 

The T. Rowe Price Natural Resources ETF (TURF), for example, could be poised to play a standout role should stagflation take hold. The fund charges a 44 basis point (bps) fee to actively invest in stocks tied to natural resources. That includes firms engaged in the upstream extraction of mineral, energy, and agricultural products. 

The active ETF applies its fundamental, bottom-up portfolio construction approach, with candidate firms required to be classified in the MSCI GICS Natural Resources sector. Applying value and growth approaches as needed, the strategy has returned 5.4% over the last three months, per ETF Database data. 

Looking ahead, the fund’s exposure to commodities firms like energy leaders Shell (SHEL) could see it benefit from rising prices. What’s more, its ability to chase outperformance and apply a fundamental research approach could also help the fund find the strongest contenders in the console space overall. Together, the ETF may be one to watch in the months ahead.

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