For 2024, it’s fair to say that the global economy has not performed how analysts expected it to. T. Rowe Price’s 2024 Global Market Outlook Midyear Update discusses how global inflation has remained stickier than previously anticipated. Broadly speaking, there have been fewer rate cuts from central banks, contributing to continued growth.
With the global economy off to a slower start than expected, fewer rate cuts likely remain on the table for 2024. Looking at the U.S., T. Rowe Price anticipates that the ongoing inflation fight will limit the Federal Reserve to only one or two rate cuts.
Looking ahead to 2025, T. Rowe expressed concern that “even modest rate cuts” could propel economic growth too quickly. Should that happen, it could lead to a resurgence in inflation, along with possible rate hikes next year.
“In this unusual scenario, we would expect more divergence in returns as investors sort through the implications for sectors and individual securities,” noted T. Rowe Price. “Active portfolio management, with a focus on fundamental analysis and relative value, would be vital in this environment.”
Strategy for Markets Responding to Shifting Rates
The T. Rowe Price Capital Appreciation Equity ETF (TCAF) can offer long-term growth while mitigating potential risk. The fund’s performance is benchmarked to the S&P 500 Index and has a net expense ratio of 0.31%. TCAF is actively managed and used a portfolio constructed with “bottom up” fundamentals to locate assets with lower risk and higher return potential.
By focusing on quality companies instead of chasing market cycles or economic trends, TCAF can perform well regardless of how the market responds to shifting interest rates. With a disciplined active approach, the fund can also reallocate assets in instances of long-term market drawdowns.
Fund flows illuminate how T. Rowe’s long-term fundamental approach is resonating with the investment community. As of June 19, 2024, TCAF has seen more than $200 million in net flows over the last month, bringing the total AUM to over $1.7 billion.
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