Growth-focused equities may be falling to the wayside as the capital markets continue to digest the hot inflation data. The narrative is now turning into recession fears as inverted yield curves, and slower corporate earnings add to the wall of worry.
Citigroup analysts are seeing a potential mild recession in 2023, leading to a 20% drop in the S&P 500. That, in turn, could trigger “a more severe, macro growth scare” that could potentially see the index drop by even more.
Right now, all eyes are on the Federal Reserve and how its moves will keep inflation in check. Right now, the capital markets aren’t responding positively as more tightening of monetary policy continues in 2022, which could lead to more pain in 2023, according to Citigroup.
“Recession risks are more limited in 2022 but rise significantly by mid-to-late 2023,” Citi analysts said, adding that they expect fallout to be mostly felt in the first half of next year, according to MarketWatch.
“Investors see rising probabilities of a macro growth scare over the next 12 to 18 months,” Citi analysts added. “Relative to previous recessions,” they expect the stock market’s response “to be earlier on both the way in and out.”
It’s one thing to get aggressive with growth and another to bring market stability when major indexes are experiencing heavy volatility like they are now. That said, one exchange traded fund (ETF) can allow investors to keep one eye on growth and the other on mitigating risk with the T. Rowe Price Blue Chip Growth ETF (TCHP).
TCHP seeks to provide long-term capital growth by investing “at least 80% of assets in the common stocks of large and medium-sized blue-chip companies” and “focuses on companies with leading market positions, seasoned management, and strong financial fundamentals,” according to T. Rowe Price.
As its name explicitly states, TCHP contains blue chip household names. Looking at its top 10 holdings, three names that immediately jump out are Microsoft, Apple, and Amazon — perfunctory growth companies in tech that can provide growth over the long-term and remain at ease during heavy volatility, given their large-cap characteristics.
Unlike index-based ETF counterparts, the actively managed TCHP portfolio is based on fundamental analysis and security selection. Investors may be more inclined to remain invested when they have an active adaptive strategy to help navigate these challenging markets.
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