2024 continues to produce some notable uncertainty for investors. With the prevailing sense being to “hurry up and wait” for new information -- whether about interest rates, inflation, AI, or geopolitical risk -- it can help to check in with industry leaders to hear their thoughts. T. Rowe Price’s Jay Nogueira recently shared his perspective on the outlook for the remainder of 2024 and how the firm’s research approach sets itself apart.
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Nogueira is the director of research for North America within T. Rowe Price’s Equity division. He joined the firm in 2004 as an investment analyst for healthcare equities. He currently oversees the analysts who manage the T. Rowe Price U.S. Equity Research ETF (TSPA).
Nogueira's Outlook on 2024
What, then, is Nogueira’s outlook for the rest of the year? While many market watchers ended 2023 fearing recession, he explained that the market has instead been resilient. That resilience has borne the weight of inflation and higher-for-longer interest rates. The more interesting thing, he pointed out, is the level of concentration in the market.
"The top 10 stocks in the S&P 500 represent 36% of the value right now, which is unbelievable, a very high number. The top 10 are also driving the vast majority of the index's returns," Nogueira added. "Over history, the top 10 are usually 10% of the returns."
Nogueira pointed to similar instances in history, like the Four Horsemen stocks just before the recession, as a concerning parallel. The current AI theme driving returns in some ways harkens back to earlier moments when major technological innovations drove markets forward, he added.
T. Rowe Price leverages its fundamental research approach to invest amid a 2024 outlook driven by those ideas. Epitomized in some ways by TSPA, the firm looks to emphasize the insights produced by their analysts and to neutralize as much as possible macro or factor considerations.
“So, what you're trying to do is bring it down to the actual insights fundamentally from the analysts who are experts in their area, without having a bet on interest rates or having a bet on the macro factor,” he explained.
“You're never going to be perfectly neutral,” Nogueira noted. “We don’t want the fund to do well or poorly because momentum did well one year.”
Active Investing in 2024
TSPA recently hit its three-year ETF milestone and has returned about 34% with its all-analyst team over one year. Despite the markets' recent strong, but concentrated performance, TSPA has still managed to outpace the benchmark S&P 500 over the past year and since inception. The fund includes Nogueira, and fellow North American equity research directors Ann Holcomb and Jason Polun, who are part of its portfolio management team. Associate portfolio manager Alexa Gagliardi is also listed, per the firm’s site.
That active approach could provide some real benefits should the 2024 outlook see those bigger firms take a downswing. Per Nogueira, active management can play a key role when the largest names dip after a period of leadership.
“As an active manager, you can use that as a source of basis points for making bets elsewhere,” he said.
Nogueira attributed the firm’s success and strong research capabilities to the collaboration it fosters across the company. While the pandemic’s broad switch to remote work did allow the firm more contact with the companies that analysts examine, it also cut down on the moment-to-moment conversations that pushed collaboration.
“What we were missing was that collaboration, that being on a trip and talking through the names, the scuttlebutt in the hallways where we’re all pushing each other,” he explained.
TSPA charges only 34 basis points and had about $600 million in AUM as of June 7. The strategy is just one of a selection of funds at the firm that rely on those research capabilities, which could provide a suite of intriguing options as the outlook for 2024 remains cloudy.
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