David Kelly, Chief Global Strategist at J.P. Morgan Asset Management, joined Julie Cooling, Founder and CEO of RIA Channel, to discuss a slowing economy and the demand for active ETFs.
Kelly notes that the overall economy is in better condition than many investors realize, as it is settling into slower growth. At the beginning of the year, Kelly’s forecast for the economy was 2024: 2% growth, zero recession, inflation moving toward 2%, and 4% unemployment, with the 2025 forecast now looking for more of the same. The soft landing has been helpful for the return on financial assets, and the economy seems to be in good health given the age of the expansion.
Investors need to consider the complete and complicated mosaic of the U.S. labor market. Overall, job openings seem to be growing, but unemployment is still low. It is important for advisors not to overreact to any single data point.
Compared to $18 trillion in mutual funds, ETFs have exploded to $9 trillion in assets under management. Actively managed ETFs allow managers to take advantage of mispricing in markets.
Given the market environment, investors are increasingly interested in staying invested in the equity market while sacrificing some upside returns for downside protection. Artificial intelligence is now being deployed in some equity funds, offering quantitative insights to investors without the large number of analysts that may be employed by traditional actively managed funds.
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