Turnkey Tech Investing: December 2020 Market Brief

By Bill Studebaker, CIO & President, ROBO Global

It’s fair to say no one has ever been more excited to turn the page and begin a new year than we all were on New Year’s Eve in 2020. In many ways, 2020 qualified as the worst year in recent memory. The global pandemic resulted in nearly 2 million deaths (so far) and caused a disastrous economic tsunami that stretched across the globe. Businesses were devastated, jobs were lost, and supply chains were disrupted. And yet, somehow, someway, the markets managed to exceed all expectations. Despite the effects of the pandemic, the ACWI—often considered the best indicator of global equity market performance—finished +14.5% for the year.* No one, including myself, could have predicted such an outcome. And yet the final month of the year continued to deliver joy to investors in robotics, artificial intelligence, and healthcare innovation.

Long before the pandemic, we were firm in our conviction that robotics, AI, and healthcare innovation technologies would create tremendous disruption and growth—eventually. What we could never have anticipated was the impact of a global lockdown and its ability to push the pace of innovation and adoption into lightspeed. Robotics, automation, and AI became the star players during the pandemic, making it possible for individuals, businesses, and communities around the globe to adjust and adapt to a new reality. Against that backdrop, healthcare innovation rose to the spotlight as the MVP, enabling frontline workers to save lives and making it possible for multiple pharmaceutical companies to develop and deliver a vaccine—a process that typically takes two to five years—in less than nine months.

What robotics, AI, and healthcare innovation delivered was nothing short of remarkable. And we are confident it is just the beginning of what’s to come.  

What does that mean for investors? The current course of market volatility** may offer an answer. In 2020, the market saw 28 days where the S&P 500 index closed more than 3% higher or lower than its previous level – more than the previous nine years combined. Investors haven’t seen this level of volatility since 2008, which delivered a whopping 42 days of change >3%. While the VIX closed the month well below its Mid-March high above 80, it still remains significantly above 13 where it started the year. *** If 2021 delivers on the promise of bringing a reversion to the mean, the result should be less volatility, more dispersion, and a broadening of performance outside of FAANG*. This all could bode well for companies in robotics, AI, and healthcare innovation that, once perceived as impractical providers of science fiction, have now proven their extremely practical and very real worth.

The highly anticipated V-shaped recovery is already beginning. But much of the recovery in process is being driven by businesses with the luxuries of scale and technology—both of which made it much easier for them to weather the economic storm created by the pandemic. Others that were less equipped, including a vast swath of brick-and-mortar retailers, as well as restaurants and other small businesses on ‘Main Street,’ have found themselves at or near their breaking points—a fact that is likely to bring a more K-shaped recovery, with certain industries returning to business as usual at much slower rates than others.

The growth of the ROBO Global Indices in December 2020 can hardly be called a ‘Santa Clause rally’—investors have been enjoying some wonderful ‘gifts’ all year long thanks to our index constituents. That said, full economic recovery is everyone’s wish for the New Year, and it is a reality that will come only with eradication of COVID-19. Thankfully, the vaccine is here, and with the coronavirus soon to be in the rear-view mirror, investors can hopefully begin to prepare for a new and rapid wave of growth ahead—with robotics, AI, and healthcare technology companies continuing to lead the way. Happy New Year, and cheers to what’s to come in 2021!

 

 

*Source: Bloomberg

**Volatility is a statistical measure of the dispersion of returns for a given security of market index.

***Source: Bloomberg

****FAANG is an acronym referring to the five most popular American technology companies: Facebook, Amazon, Apple, Netflix and Alphabet (Formerly known as Google)

 

Disclosure

Indices are unmanaged and do not include the effect of fees. One cannot invest directly in an index.

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