January 2022 has been a tough start to the year providing, in our opinion, investors another real opportunity to make money. The market has been hit by rising inflation and discount rate expectations and, as a result, a rotation from growth to value/cyclicals. As a current or potential ROBO Index investor, we want to inform you about how ROBO is positioned, as well as stress the opportunity around automation and robotics going into 2022 and beyond.
The current drop in share price may be unsettling for investors. That is understandable. The sudden tech rout has sent stock valuations tumbling to their lowest level since the first few months of the pandemic. Adding salt to the wound, this shift arrived just as positive key earnings for some of the key ROBO constituents began. But if we take a deep breath and step back, we can see that much of the froth has already subsided for many market segments. Headline multiples have contracted to more reasonable levels, and expectations have been meaningfully (and appropriately) curtailed.
Importantly, the question remains: Will robotics, automation, and AI continue to grow in 1, 3, and 5 years? We believe the answer is unequivocally YES, which is why investors need to stay invested in this theme. Downturns are never pretty, but we continue to believe that robotics, automation, AI, and healthcare technologies represent one of the most powerful investment opportunities of our generation. The pandemic proved that point, creating an urgent call to automate which accelerated the adoption of existing technologies and increased demand for more research and development.