Investment

Thematic Investing: How to Invest in the Next Big Idea

Published

1 year ago

May 25, 2023

Thematic Investing: How to Invest in the Next Big Idea

From clean tech to artificial intelligence, thematic investing provides exposure to disruptive innovations that underlie the next frontier of investing.

In this infographic sponsored by Opto from CMC Markets, we identify the trends and investment themes that could reshape society and unlock future growth opportunities.

Long-Term Structural Growth Trends

Which four trends could define our future?

Climate Change: Extreme weather disruptions, investment in green solutions.
- Climate-related risks and their implications are gaining serious attention from governments, businesses, and investors. Consider how global government green spending has risen by nearly 40% since 2008, rising to $714 billion in 2022.
Disruptive Technology: Exponential speed of technological advancement.
- More technological progress is forecast to occur over the next ten years than the last 100 years combined. In fact, the computational capacity of the fastest supercomputers has skyrocketed from 17.6 quadrillion floating-point operations per second in 2012 to 1,100 quadrillion in 2022.
- Floating point operations are a form of measuring the performance of supercomputers, some of which are one million times faster than a laptop.
Demographic and Social Change: Aging populations.
- From China to Europe to the U.S., a great demographic transition is underway. The global elderly population, defined as those 65 years and older, is anticipated to double from 761 million in 2021 to 1.6 billion in 2050.
Next Generation Economy: Decentralization, Web3.
- Decentralization involves distributing power away from a single, powerful authority. Web3, the third generation of the internet and web-based technologies, uses decentralized blockchain technology instead of a centralized database seen in many websites and applications today.

With these trends in mind, which themes are set to offer outsized investment opportunity over the next 10, 20, or 30 years?

Thematic Investing Opportunities

Here is a breakdown of the next wave of thematic investing opportunities. Each theme shows the market’s expected compound annual growth rate (CAGR) from 2022-2026, and a timeline for when growth is expected to slow down.

Although most themes will likely continue to grow for decades, some may experience plateauing growth as their industries mature.

Theme	CAGR 2022-2026	Expected Slowdown in Growth
⚛️ Hydrogen	6%	2050
???? Space	7%	2050
???? Autonomous Vehicles*	23%	2047
????️ Smart Cities	26%	2045
???? AI	19%	2040
☀️ Solar**	7%	2038
???? Genomics	18%	2030
???? Lithium & Battery Tech	11%	2028
????????‍⚕️ Telemedicine	8%	2026
????Semiconductors	5%	2026

*CAGR is for the period 2021-2026. **CAGR is for the period 2021-2025.

The space economy is attracting significant capital investment driven by its future role in climate change, security, and broadband telecommunication. For instance, satellites may provide data on greenhouse gas emissions to help improve renewable energy infrastructure.

In addition, lithium is forecast to play an even greater role in the economy. Global electric vehicles surpassed a record 10 million in sales in 2022, and will continue to drive demand for lithium looking ahead.

Characterized by boom and bust cycles, semiconductor chips help process vast amounts of data across smartphones, cars, home appliances, and smart infrastructure. As ChatGPT and AI advancements have taken off in the last year, several semiconductor companies have seen their stocks soar in value.

The investment landscape is set to change significantly in the years to come. While some themes are widely recognized, others are just beginning to gain traction.

Analyzing Themes Across the Adoption Curve

Diving deeper, let’s take a closer look at the growth outlook across four thematic investing opportunities and how to gain exposure to each.

1. Disruptive Technology: Semiconductors

Laggard: Growth is slowing

Pure-Play ETFs:

SPDR S&P Semiconductor ETF (XSD)
VanEck Semiconductor ETF (SMH)

Many chipmakers have long-term agreements with Big Tech. As the pace of technological advancement accelerates, the implications will be far-reaching for semiconductor companies. In 2022, the global semiconductor industry was estimated to have record sales of $636 billion.

2. Climate Change: Solar

Early Majority: Growth is moderate

Pure-Play ETFs:

Invesco Solar ETF (TAN)
Global X Solar ETF (RAYS)

Thanks to cost efficiencies, 90% of new global power capacity is forecast to come from renewables by 2027—with solar making up the lion’s share. Over 70 countries, 1,200 companies, and 1,000 cities have made net-zero pledges.

3. Demographic and Social Change: Smart Cities

Early Adopter: Growth is increasing

Pure-Play ETFs:

Lyxor MSCI Smart Cities ESG ETF (IQCY)
Amundi Smart City ETF (SCITY)

High-speed internet coupled with sensors, IoT, and machine-to-machine communication could drive a paradigm shift in urban design. By 2050, it’s expected that 68% of the world population will be living in urban areas.

4. Disruptive Technology: Space

Innovators: Growth is accelerating

Pure-Play ETF:

ARK Space Exploration & Innovation ETF (ARKX)

Space has over 200 use cases including energy, agriculture, and defense activities. By 2040, it could become a $1 trillion dollar industry, up from $469 billion in 2021.

Each theme could present a significant opportunity for investors, fueled by rapid technological advancement and broader societal shifts.

How can investors gain exposure to these thematic ETFs?

The Opto App helps users identify the top trends shaping our future. Compare, analyze, and track 40 disruptive themes and over 160 ETFs.

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Economy

S&P/TSX composite down more than 200 points, U.S. stock markets also fall

Published

1 week ago

September 6, 2024

Anne Joseph

TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.

The S&P/TSX composite index was down 239.24 points at 22,749.04.

In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.

The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.

The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.

The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.

This report by The Canadian Press was first published Sept. 6, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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Economy

S&P/TSX composite up more than 150 points, U.S. stock markets also higher

Published

3 weeks ago

August 29, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.

The S&P/TSX composite index was up 171.41 points at 23,298.39.

In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.

The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.

The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.

The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.

This report by The Canadian Press was first published Aug. 29, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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Investment

Crypto Market Bloodbath Amid Broader Economic Concerns

Published

1 month ago

August 5, 2024

Harry Miller

The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.

The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.

Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.

The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.

Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.

Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.

Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.

Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.

The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.