As emerging technologies reshape the global economy at a breath taking pace, ‘New Economies’ are being created that upend more traditional industries. The World Economic Forum has dubbed this the Fourth Industrial Revolution, during which the means of production are characterized by technologies that blur the lines between the physical, digital, and biological spheres.1
This New Economy we live in today merges the characteristics of man and machine. This is driven by:
The New Economy creates new opportunities for investors. Every day, traditional sectors and industries are transforming as innovation and artificial intelligence (AI) create technological shifts in our modern economy. These shifts will impact everything from where we live and the jobs we do to the food we eat and how long we live.
From ridesharing to flying taxis, autonomous vehicles present an enormous opportunity for growth. McKinsey & Co. estimates that shared mobility and autonomous vehicles will garner 73% market share of the automobile industry, driving that industry’s growth over the next decade.2
From drones to cybersecurity, AI is changing every aspect of war. In response, the line between technology and defense is blurring, with worldwide spending on militarized AI projected to rise to $118 billion by 2023.3
An estimated $4.6 trillion in infrastructure spending is needed to fix America’s aging infrastructure by 2025.4 Beyond roads, bridges and tunnels, tomorrow’s infrastructure will extend to smart buildings, power grids and intelligent water.
From the satellites that guide our GPS, to pharma trials in micro-gravity and tourists on Mars, space industry revenues have grown at 7% per year since 2005 and are forecast to account for 5% of US GDP by 2040.5
Significant progress has been made to improve energy efficiency and reduce the costs of the underlying technology involved in generating power from wind, solar, hydroelectric and geothermal sources. Renewable energy is projected to account for 75% of the global power new capacity addition by 2050 —up from 56% at the end of 2018.6
Investors looking to incorporate New Economy thinking into their portfolio allocations could consider:
Pursue more dynamic growth by focusing on future disruption to potentially control both growth and sector drivers.
Emphasize an emerging trend within a particular segment of the economy to create a more robust growth profile.
Target a broad theme and capture the entire ecosystem fueling innovation.
Technological change knows no bounds. Product innovation shouldn't either.
SPDR ETFs has partnered with Kensho Technologies, Inc., a specialist in identifying innovative companies that are positioned for growth, to bring six thematic ETFs to market:
SPDR® S&P Kensho New Economies Composite ETF
SPDR® S&P Kensho Smart Mobility ETF
SPDR® S&P Kensho Future Security ETF
SPDR® S&P Kensho Intelligent Structures ETF
SPDR® S&P Kensho Final Frontiers ETF
SPDR® S&P Kensho Clean Power ETF
1 “The Fourth Industrial Revolution: What it means, how to respond,” weforum.org, as of 01/14/2016.
2 Automotive revolution perspective towards 2030, McKinsey & Co. 2016.
3 “Artificial Intelligence Market Forecasts,” Tractica Research, as of 04/30/2019.
4 American Society of Civil Engineers 2017 Infrastructure Report Card.
6Bloomberg New Energy Finance, as of 03/20/2019.
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