By Bill Studebaker, CIO & President, ROBO Global
There are no words to properly describe the violence that is taking place in Eastern Europe right now. My frustration is especially high given it was just starting to feel like the world was reconnecting post-COVID. We can only hope that the damage will be minimal and that cooler heads will prevail. That is as true for global leaders as it is for investors.
The month of February was tough for investors, and ROBO Global was no exception as evidenced by the decline in all three of our ETF strategies. By the end of the shortest month of the year, ROBO Global Robotics and Automation Index ETF (ROBO) was down -3.62%, the ROBO Global Healthcare Technology and Innovation ETF (HTEC) was off -2.26%, and the Robo Global Artificial Intelligence ETF (THNQ), the hardest hit, closed at -5.73%.1
If there was any concern about elevated valuations, we can now be confident that the markets have reset to more ‘respectable’ levels. So where do we go from here? The bears have argued that “there is no free lunch.” Even so, many questions remain now that we are on the other side of the largest easing of fiscal and monetary policy in history. As the economy and markets work their way through a tightening cycle due to a correction across all major indices, we are now trading in choppy waters indeed. Higher rates translate into lower terminal values, resulting in reduced stock prices. But if rates go down, does that necessarily indicate that growth is slowing and, in turn, that stocks will go down? One thing is certain: investors can’t have it both ways.
While it’s hard to ignore the overwhelming bearish tone in the current environment, there are still quite a few bulls out there who are focused on the positive. Technically, the set up for a move higher seems likely as many charts are very oversold. There is also the possibility of good news on several different fronts that impact the markets, including geopolitical, fundamental, fiscal, and monetary.
Another positive, especially for investors in ROBO Global, is that technological progress is continuous. We have always viewed the growth of disruptive technology as inevitable. Amid recent events, regional tensions have raised global fears over stability, resulting in a major blow to the global equity markets. At this juncture, it’s important to ask ourselves a simple, honest question: ‘Will the development and application of disruptive innovations stop in the face of it all?’
Our response is also simple: ‘No way!’
Historically, whenever one form of innovation runs its course, it is quickly replaced by another… and another. And with each cycle, technology becomes more powerful and impactful. Surely, Russia’s aggression will not stop this generations-long cycle of development. There is far too much momentum pushing technology forward, and global conflicts typically accelerate—not slow—progress.
Aside from the news of war, it’s also true that the impact of every dollar spent by a person, entrepreneur, or company is growing exponentially; every dollar invested today drives significantly more change that it did even a decade ago. One prime example is DNA sequencing, a technology that is demonetizing at a speed 5x faster than Moore’s Law. Just over 20 years ago, Craig Venter led the first draft sequence of the human genome at a cost of $100 million. Today, this same process can be achieved for less than $1,000—at relatively lightning speed (what took 9 months to sequence in 2001 takes just hours today) and ~100,000x cheaper.
There is also more ‘capital abundance’ today than ever. Companies raised more capital in 2021 (during a pandemic, no less!) than at any other time in human history. This included $330B in investments in startups by venture capital firms in the US alone, double the $166.6B invested in 2020 and an all-time high equivalent to more than $900M in investments every day of the year2. Any way you slice it, this era of unprecedented capital abundance is driving the pace of innovation to record speeds and bringing previously unimaginable technologies to life.
None of us know what will come next in Ukraine, the world, or the markets. All we can hope for investors—even during a global crisis— is that exposure to disruptive technologies may pay off in the long run.
1 Source: ROBO Global®, S&P CapitalIQ, For standardized performance data current to the most recent month end, please visit www.roboglobaletfs.com.
2 Source: Peter Diamandis, Entrepreneur, Technologist & Futurist
The performance data quoted represents past performance and does not guarantee future results.
This material represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the funds or any security in particular.