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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:
Exponential processing power
Robotics and automation
Smart Cities. Self-driving Cars. Space Travel.
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.
What are the New Economy Sectors?
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
Capitalize on the Opportunity
Portfolio Construction Ideas
Investors looking to incorporate New Economy thinking into their portfolio allocations could consider:
Complement an Existing Core or Growth Allocation
Pursue more dynamic growth by focusing on future disruption to potentially control both growth and sector drivers.
Amplify Existing Sector Positions
Emphasize an emerging trend within a particular segment of the economy to create a more robust growth profile.
Replace a Narrow Thematic Position
Target a broad theme and capture the entire ecosystem fueling innovation.
Pursue the Potential
Technological change knows no bounds. Product innovation shouldn't either.
SPDR® S&P Kensho ETFs
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:
Concentrated investments in a particular sector or industry tend to be more volatile than the overall market and increases risk that events negatively affecting such sectors or industries could reduce returns, potentially causing the value of the Fund’s shares to decrease.
Passively managed funds invest by sampling the Index, holding a range of securities that, in the aggregate, approximates the full Index in terms of key risk factors and other characteristics. This may cause the fund to experience tracking errors relative to performance of the Index.
Select Sector SPDR Funds bear a higher level of risk than more broadly diversified funds. All ETFs are subject to risk, including the possible loss of principal. Sector ETFs products are also subject to sector risk and nondiversification risk, which generally results in greater price fluctuations than the overall market.
KENSHO® is a registered service mark of Kensho Technologies Inc. ("Kensho"), and all Kensho financial indices in the Kensho New Economies' family (the "Kensho Indices") and the Kensho Indices corresponding service marks have been licensed by SSGA Funds Management, Inc. ("SSGA FM") in connection with the SPDR S&P Kensho Intelligent Structures ETF, SPDR S&P Kensho Smart Mobility ETF, SPDR S&P Kensho Future Securities ETF, SPDR S&P Kensho Clean Power ETF, SPDR S&P Kensho Final Frontiers ETF and SPDR S&P Kensho New Economies Composite ETF (collectively, the "SPDR Kensho ETFs"). The SPDR Kensho ETFs are not marketed, sold, or sponsored by Kensho, Kensho's affiliates, or Kensho's third party licensors.
Pursuant to the license agreement entered into by SSGA FM with Kensho, SSGA FM pays a fee to use the Kensho Indices. SSGA FM is sublicensing rights to the Kensho Indices to the SPDR Kensho ETFs at no charge. Kensho is not affiliated with SSGA, SSGA FM or their affiliates.
Kensho is not an investment adviser or broker-dealer and Kensho makes no representation regarding the advisability of investing in any investment fund, other investment vehicle, security or other financial product regardless of whether or not it is based on, derived from, or included as a constituent of any Kensho Indices. Kensho bears no responsibility or liability for any business decision, input, recommendation, or action taken based on Kensho indices or any products based on, derived from, or included as a constituent of any such index. All referenced names and trademarks are the property of their respective owners.
Technology companies, including cyber security companies, can be significantly affected by obsolescence of existing technology, limited product lines, and competition for financial resources, qualified personnel, new market entrants or impairment of patent and intellectual property rights that can adversely affect profit margins.
ETFs trade like stocks, are subject to investment risk, fluctuate in market value and may trade at prices above or below the ETFs net asset value. Brokerage commissions and ETF expenses will reduce returns.
Standard & Poor's®, S&P® and SPDR® are registered trademarks of Standard & Poor's Financial Services LLC (S&P); Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC (Dow Jones); and these trademarks have been licensed for use by S&P Dow Jones Indices LLC (SPDJI) and sublicensed for certain purposes by State Street Corporation. State Street Corporation's financial products are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates and third party licensors and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability in relation thereto, including for any errors, omissions, or interruptions of any index.
Distributor: State Street Global Advisors Funds Distributors, LLC, member FINRA, SIPC, an indirect wholly owned subsidiary of State Street Corporation. References to State Street may include State Street Corporation and its affiliates. Certain State Street affiliates provide services and receive fees from the SPDR ETFs. ALPS Distributors, Inc., member FINRA, is the distributor for DIA, MDY and SPY, all unit investment trusts. ALPS Portfolio Solutions Distributor, Inc., member FINRA, is the distributor for Select Sector SPDRs. ALPS Distributors, Inc. and ALPS Portfolio Solutions Distributor, Inc. are not affiliated with State Street Global Advisors Funds Distributors, LLC.
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