Turnkey Tech Investing: October 2020 Market Brief

5 Nov, 2020

Turnkey Tech Investing: October 2020 Market Brief

By Bill Studebaker, CIO & President, ROBO Global

 

The crescendo leading up to any presidential election day always brings a sense of adrenaline, excitement… and, inevitably, some anxiety. What’s the best cure for those nerves? Preparation.

As the election has drawn closer over the past few weeks, investors seem to have grown more complacent, penciling in a Biden win and counting on an eventual stimulus package. At the same time, investors appear to be taking the second wave of COVID-19 (and the high potential of a third and even fourth wave) for granted. This combination of factors has pushed equity volatility higher. As a result, the S&P 500 hasn’t been able to make a new closing high in eight weeks—the longest period since the new bull market began in March.

Though many sectors suffered significant losses during the month, the growth of robotics, AI, and healthcare innovation illustrated the relevance of these technologies amid the pandemic. Though the S&P 500 was down -2.66% for the month, the ROBO index and THNQ index both saw modest growth of 0.24% and 0.25% respectively, vs. a -2.43% for the ACWI Index. Year to date, the ROBO index is up +4.69%, and the THNQ index is up +35.81%.

While the outcome of this week’s US Presidential election is sure to set off a wave of emotions throughout the world, I believe this is the perfect moment for investors to hit the reset button and get back to the fundamental work of investing. The key to long-term success will be to step back from whatever you may be feeling in this moment, take a close look at what is really happening across the market, and make decisions now that set the stage for growth, regardless of who ends up in the White House.

 

Here are two points to keep in top of mind:

 

  • Automation technologies have helped fulfill new consumer demands.

    2020 has been a year defined by verbs: Zoom, Tweet, Twitch, Message, Venmo, Snap, Post, and Uber (Eats), just to name a few. Each of these verbs connotes speed, which is fitting, especially considering that every one of these companies has helped fulfill a new and unprecedented need for consumers to do everything from home. In a COVID-19 world, the things we value most are time, convenience, and social interaction—and our ability to live, work, play, and eat from the safety of our homes is driven by the automation technologies.


  • Robotics, artificial intelligence, and healthcare innovation will enable recovery.

For decades, the benefits of robotics, AI, and healthcare innovation have been somewhat theoretical, with innovation and adoption occurring at a steady—but not particularly speedy—pace. The COVID-19 crisis elevated the critical nature of these technologies, bringing the importance of the internet, the need for advanced technologies in healthcare, and the ability of AI to fuel the future to the forefront. From our perspective, the fastest and most efficient path out of this crisis is through the use of robotics, artificial intelligence, and healthcare innovation.

 

As we have discussed repeatedly, the ROBO Global Index Methodology is designed to prefer the small-cap and mid-cap companies that often deliver higher earnings growth than larger-cap companies that are already highly valued—and often over-valued. Since their inception, our indices have favored subsectors that, by their nature, have been sheltered from the impact of the pandemic. At ROBO Global, we continue to invest in companies within these sectors that are able to operate normally during the pandemic and that are delivering solutions that matter in a COVID and post-COVID world.

Winter is coming—including the outcome of one of the most contentious US presidential elections in memory. But no matter which way the wind blows, investors who recognize and invest in the robotics, AI, and healthcare innovation technologies that are enabling our new world will be prepared for whatever lies ahead.