Turnkey Tech Investing: August 2022 Market Brief

By Bill Studebaker, CIO & President, ROBO Global

 

As the markets continued to flounder throughout the month of August, investors were left wondering what to expect in the months ahead. Will inflation bring more pain? Are we reliving the tech bust? Has the bear-market bubble really burst? The answers are elusive—at best—but what we do know is that myriad macro and micro crosscurrents have thrown the market into a seemingly never-ending volley. 

Unfortunately, the current market turbulence is showing no signs of coming to an end. The summer earnings season brought renewed concerns about supply-chain disruptions, the specter of a recession in Europe, and an abrupt decline in early-cycle sectors of the US economy including housing and automotive, all of which impacted the markets. After mounting a staggering recovery off of the June lows, the past two weeks have made it quite clear that even a Bear as large as this one can’t fight the Fed. On the bright side, it was positive to see Powell reaffirm his flexibility in being data dependent! Even that, however, wasn’t enough to lift the markets out of the red to close the month. Our own ROBO Global ETFs were no exception.

For the month of August, the ROBO Global Healthcare Technology and Innovation ETF (HTEC) declined -6.40% and the ROBO Global Robotics and Automation Index ETF (ROBO) dropped -7.36%. By comparison, the ROBO Global Artificial Intelligence ETF (THNQ) fared well, falling just -1.81%.1 

In times like these, keeping an eye on the long game is particularly important, and if there was ever a time when the trends have pointed to robotics, automation, and AI as portfolio insulation, this is it. While we have long preached the benefits of these technologies as the solution to myriad business challenges—from labor shortages and broken supply chains to tightening margins and a hyper-focus on customer service—companies in every industry are now illustrating their undeniable value. US robot orders surged to a record-high of 40% in June as companies struggled in the face of more than 11.4 million unfilled job openings across the US, and extended backlogs bode well for continued acceleration well into 2023.2 Activity across the sector has been impressive. 

 

  • One of the best examples is Amazon’s announcement of its intent to acquire ROBO and THNQ holding iRobot for $1.7B on August 5.3 Though the deal is sure to undergo intense scrutiny by the FTC, M&As of this magnitude are accelerating side by side with the general growth in demand for robotics of all kinds.

 

  • Also in August, ROBO holding Zebra Technologies received a 2022 Supplier Performance Award from the U.S. Postal Service (USPS) for outstanding service and delivery. USPS scans, tracks and traces mail and packages across its delivery network using the company’s Zebra TC77 touch computers. The technology is also used to provide real-time updates to USPS customers.4 

 

  • Earlier this summer, ROBO and THNQ holding Ocado Group announced its acquisition of Myrmex for $11M (€10.2M), a material handling startup. The acquired tech is expected to assist the development of Ocado’s intelligent asset handling systems for its Smart Platform.5

 

With inflation rising, margins shrinking, and no end in sight to the labor shortage, we believe technology is proving to be the best remedy for lagging productivity and dearth of new sources of growth. According to our estimates, aggregate sales growth for ROBO index members is set to reach 13% in 2022, driven by Sensing, Computing/AI, Food & Agriculture, and Actuation. This is significantly higher than the 8% average sales growth over the past 9 years and the 8% revenue growth that has been forecast for the S&P 500 (excluding Energy).6 The fact that this is happening in the face of significant currency headwinds is further proof of undeniable demand for all things related to robotics, automation, AI, and healthcare technologies.

As we shift into fall, we believe there are important advantages that may serve to buoy the markets in general and the ROBO Global indices specifically. Jackson Hole and the US earnings season are now in the rear-view mirror, giving investors time to digest, reset, and rethink their conviction on the trajectory for equities going into the latter half of the year. That, combined with the push to automate everything from factories and warehouses to restaurants and retail stores, may be the much-needed catalyst to push equities out of the mud and onto a winning court. Here’s to winning every rally that’s headed our way!

 

 

 

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: "US robot orders surge 40% as labor shortages, inflation persist," Fox Business/Technology, June 1, 2022

3 Source: Amazon

4 Source: Zebra Technologies

5 Source: Ocado Group

6 Source: ROBO Global®, S&P CapitalIQ,

 

ROBO Top Ten HoldingsHTEC Top Ten HoldingsTHNQ Top Ten Holdings

 

The performance data quoted represents past performance and is no guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when sold or redeemed, may be worth more or less than the original cost. Current performance may be lower or higher than the performance data quoted. 

Index returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Holdings are subject to change.

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 fund or any security in particular. Please consult your financial advisor for further information.

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