When Market Vol Turns Things Upside Down, Trust Active Investing

The Fed’s big rate cut has arrived, boosting market performance and brightening outlooks. With potentially even more cuts coming down the line, too, investors have reason for optimism. Looking further ahead, though, volatility remains a significant risk. Rate cuts may fail to reinvigorate a sputtering economic engine while also reheating stubborn inflation. Those rate cuts could also fail to stymie policy and geopolitical risk. In that scenario, active investing may provide a powerful toolset.

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T. Rowe Price recently explored the idea of market volatility turning investors’ worlds upside down with a public exhibit at the Oculus in New York City. The upside down newsstand pictured captures the idea of big market swings that totally throw investors for a whirl.

“We are embracing the idea that when markets feel upside down, actively managed ETFs can help turn your investment world straight again,” said Kelly Fredrickson, head of global brand and public relations at T. Rowe Price.

The spring tariff swoon provides one notable example. When the Trump administration announced its sweeping tariff regime, many U.S. stocks faltered while foreign investments spiked, validating early year expectations around a weakening dollar. 

Active investing did well in that scenario, with active international ETFs contributing significantly. Where passive ETFs in the international space may struggle to adapt, active can adjust to big market events or volatility. 

What’s more, active international ETFs also provide a deeper scrutiny on potential investments. Passive funds sometimes have to select certain names to meet market cap-weighting requirements or other sector obligations. Active investing can provide a fundamentals-driven, bottom-up approach that can especially matter in lower information foreign markets.

Of course, market vol doesn’t just mean foreign markets doing well. In both fixed income and equities, active investing’s deeper focus can prepare it more for when the world spins. The T. Rowe Price Capital Appreciation Equity ETF (TCAF) presents one powerful option therein. Managed by David Giroux, its intense focus on fundamental research has performed very well and could make for a strong add to bring active investing to investors’ holdings.

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