7 Jan, 2020 image
search_img

Turnkey Tech Investing: December 2019 Market Brief

By Bill Studebaker, CIO & President, ROBO Global

 

What a difference a year makes. Investors climbed yet another wall of worry in December, enabling the bull market to rise to new record highs. It was a welcome mid-cycle refresh that can help extend the expansion.

In December 2018 we articulated our extremely bullish view on robotics and artificial intelligence. Penetration rates were at their nascent beginnings, and all arrows were pointing to decades of growth. At the same time, valuations were at the lowest levels in the history of the ROBO index. Today, just one year later, our bullish outlook remains. Valuations now stand just above historical averages, and earnings are set to enter a new upcycle.

For the month of December, the ROBO index gained 2.8% and importantly, 30.3% in 2019, outperforming global equity indices, despite significant exposure to non-US equities and small- and mid-caps, while global equity markets were driven by the US and large-cap growth stocks in general, including the S&P 500 (+29.2%), Russell 2000 (+23.8%), MSCI Europe (+23.2%), MSCI Japan (+16.7%), MSCI China (+19.8%), and MSCI EM (+16%).

As we move into 2020, we expect earnings to accelerate in both the ROBO and AI strategies. While many strategists have forecast anemic growth for the year ahead, we see another outcome developing. Early in 2019, we argued that in order to see a meaningful rotation of flows from the US to the rest of the world, investors would likely have to see sustained outperformance—and experience some ‘FOMO’ (Fear of Missing Out)—in order to change direction. However, given the trajectory of Cyclicals vs. Defensives throughout 4Q, it may well be that the inflection point we’ve been waiting for has already arrived.

With 56% of the portfolio outside North America, the ROBO strategy should benefit from both international tailwinds and the index’s balanced diversification. The Asian flu has subsided, and we are seeing improvements in factory automation. However, Europe will be the one to watch in 2020 due to the relative valuation discount vs. the US at ~37%. With the Brexit overhang effectively cleared up, Eurozone equities could re-rate, and with 10% of ROBO in Germany alone, we remain optimistic. Happy New Year!

 

You are now leaving the ROBO Global website

You are now leaving the ROBO Global website. The following landing page may contain information concerning investments, products or other information. Exchange Traded Concepts LLC, the Fund Advisor are not responsible for the accuracy or completeness of information on non-affiliated websites. The material available on non-affiliated websites has been produced by the entities that are not affiliated with Exchange Traded Concepts LLC. Descriptions of, references to, or links to products or publications within any non-affiliated linked website does not imply endorsement of that product or publication by Exchange Traded Concepts LLC. Any opinions or recommendations from non-affiliated websites are solely those of the independent providers and are not the opinions or recommendations of Exchange Traded Concepts LLC, which is not responsible for any inaccuracies or errors.

Proceed

Dismiss

You are now leaving the ROBO Global website

You are now leaving the ROBO Global, LLC website and being directed to ETF Securities (UK) Limited which is authorized and regulated by the United Kingdom Financial Conduct Authority (the “FCA”). By clicking “OK”, you acknowledge that you are someone authorized to undertake investment activities relating to the Exchange Traded Funds (ETFs). IN addition, you understand that ROBO Global, LLC is not making any financial promotion or carrying out any regulated activity of said products. The following landing page may contain information concerning investments, products or other information. ETF Securities (UK) Limited is not responsible for the accuracy or completeness of information on non-affiliated websites. The material available on non-affiliated websites has been produced by entities that are not affiliated with ETF Securities (UK) Limited. Descriptions of references to, or links to products or publications within any non-affiliated linked websites does not imply endorsement of that product or publication by ETF Securities (UK) Limited. Any opinions or recommendations from non-affiliated websites are solely those of the independent providers and are not the opinions or recommendations of ETF Securities (UK) Limited, which is not responsible for any inaccuracies or errors.

Proceed

Dismiss

You are now leaving the ROBO Global website

You are now leaving the ROBO Global, LLC website and being directed to ETFS Management (AUS) Limited which is authorized and regulated by the Australian Securities and Investments Commission (“ASIC“). By clicking “OK”, you acknowledge that you are someone authorized to undertake investment activities relating to the Exchange Traded Funds (ETFs). In addition, you understand that ROBO Global, LLC is not making any financial promotion or carrying out any regulated activity of said products. The following landing page may contain information concerning investments, products or other information. ETFS Management (AUS) Limited is not responsible for the accuracy or completeness of information on non-affiliated websites. The material available on non-affiliated websites has been produced by entities that are not affiliated with ETFS Management (AUS) Limited. Descriptions of references to, or links to products or publications within any non-affiliated linked websites does not imply endorsement of that product or publication by ETFS Management (AUS) Limited. Any opinions or recommendations from non-affiliated websites are solely those of the independent providers and are not the opinions or recommendations of ETFS Management (AUS) Limited, which is not responsible for any inaccuracies or errors.

Proceed

Dismiss