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The Next Big Theme: December 2019

Dec 9, 2019

View all Pedro Palandrani's ArticlesPedro PalandraniPedro Palandrani

Social Media

Follow the leaders

Social media-based advertising is now a core element of political campaigns. However, social media platforms increasingly face bipartisan criticism for perpetuating misinformation, enabling groupthink and possibly favoring certain political leanings. Meanwhile, a debate about what constitutes free speech muddies the regulatory backdrop, leaving oversight to the social media companies.

On one end of the spectrum, Twitter recently announced an outright ban of political ads, setting a public precedent, though political ad spending on the platform ($5.2mn since 2018) pales in comparison to Google ($32mn) and Facebook ($67mn).1 Weeks later, Google took a middle-ground approach by forbidding ad-targeting based on public voter records or political affiliation. As for Facebook, it has yet to enact any new rules since its September announcement that it would no longer fact-check political ads. However, it is in talks with ad-buyers about broadening the reach of targeted ads.

Artificial Intelligence

Shockingly powerful

A team from Switzerland’s Electromagnetic Compatibility Laboratory developed an artificial intelligence-based system that can predict when and where lightning will strike with almost 80% certainty.2 Comparing 10 years of temperature, humidity, air pressure, and wind speed data with associated lightning strikes, the system’s algorithms were able to establish a pattern that will only improve with further use. The simplicity of the input parameters creates a world of possibility for use in areas that lack access to communication networks. Additional use cases could include disaster preparedness and mitigating potential damage, among many others. Similar predictive systems have been developed for weather projections in the past, relying on complex data sets and advanced GPUs to process them.

Cybersecurity

Department of Homeland Cybersecurity

The US Senate advanced two pieces of cybersecurity-related legislation. The State and Local Government Cybersecurity Act lays the foundation for better cybersecurity preparedness, calling for the Department of Homeland (DHS) to coordinate information sharing on cybersecurity risks with state and local governments. The National Cybersecurity Preparedness Consortium Act (NCPCA) builds on this and charters the establishment of a cybersecurity consortium of experts from universities and other bodies. The act authorizes a pseudo task force to work with DHS to prepare for and act on cybersecurity risks at the national, state, and local levels. In particular, both pieces of legislation expand the cybersecurity toolbelts of state and local governments to help protect their constituents from cyberattacks and ransomware.

Quantum Computing

Quantum Grading

The world is one step closer to a practical quantum computer thanks to researchers at the University of Waterloo in Canada. Quantum computing uses the laws of quantum mechanics to allow for the simultaneous and immediate calculation of advanced computations. But until now, it wasn’t possible to assess the quality of quantum computers’ solutions. The new development? Waterloo’s researchers developed a new quantum computing method called cycle benchmarking that allows for comparison of quantum processors’ accuracy per users’ computing use case.3 Now, researchers will be able to gauge quantum computers strengths and identify areas where they can be improved better than before.

E-commerce

Screen-busting sales

Long lines followed by a rush of deal-seeking shoppers when stores opened their doors on Black Friday seems to be a thing of the past. Consumers ditched brick-and-mortar stores this year, or at least spent less while visiting stores. According to Adobe Analytics, Black Friday brick-and-mortar retail sales fell by 6.2% compared to last year.4 Shopping behavior continues to shift online because of quick delivery times, price comparison, and overall convenience. Black Friday pulled in a record of $7.4 billion in online sales this year, a 19.6% year-on-year increase. Smartphones accounted for $2.9 billion of total sales.5

Genomics and Biotechnology

A Genomic Leap

CRISPR Therapeutics and Vertex Pharmaceuticals reported encouraging data from the first company-backed study that tests a CRISPR/Cas9 gene-editing therapy in humans. The treatment, CTX001, is in two phase 1/2 studies, testing treatments for transfusion-dependent beta thalassemia and sickle cell disease. The data come from one patient in each trial. The sample size is too small to fully determine CRISPR’s efficacy, but it illustrates gene editing’s potential.

The beta thalassemia patient needed an average of 16.5 blood transfusions per year before the study. Nine months after receiving CTX001, the patient no longer needed transfusions and had near-normal hemoglobin levels. The sickle cell patient had seven painful vaso-occlusive crises per year before CTX001. Four months after CTX001, the sickle cell patient had no vaso-occlusive crises and similar hemoglobin levels.6

Cannabis

MORE Progress in Cannabis Legalization

The House Judiciary Committee recently approved a bill to fully legalize cannabis in the US. The Marijuana Opportunity Reinvestment and Expungement (MORE) Act seeks to decriminalize cannabis, expunge prior convictions for cannabis offenses, and establish a 5% federal tax on cannabis and its derivatives. The tax revenue will fund job training and legal assistance to those communities hit hardest by the war on drugs.

The bill just completed the first stage of the legislative process and now will be sent on to the House. The legislation could pass in the Democrat-controlled House but may face strong opposition in the Republican-controlled Senate. It will then have to be signed by the President to become law. According to Skopos Labs, an automated predictive intelligence platform, the bill has a 1% chance of being enacted.7

Electric Vehicles

A Developing Market

The Tesla-dominated electric vehicle (EV) market keeps many consumers on the sidelines waiting for more options, and more price-friendly options at that. But an average battery price pack around $120 kw/h means prices would need to fall about 20% to reach price parity with an internal combustion engine. Yet, consumers can start getting ready with more options are coming to market in the next few years. Mainstream OEMs have EV models that could hit the market soon. Ford unveiled its new all-electric Mustang SUV in November, which will hit the market in 2020. And VW announced a €60 billion investment in electric mobility, hybrids, and more, to support the rollout of an estimated 26 million EVs by 2029.8

THE NUMBERS

The following charts examine returns and sales growth expectations by theme, based on their corresponding ETFs.

INTRO TO THEMATIC INVESTING COURSE – ELIGIBLE FOR CE CREDIT

Global X has developed an interactive, self-guided Intro to Thematic Investing course, that is designed to share the latest ideas and best practices for incorporating thematic investing into a portfolio.

This program has been accepted for 1.0 hour of CE credit towards the CFP®, CIMA®, CIMC®, CPWA® or RMA certifications. To receive credit, course takers must submit accurate and complete information on the requested forms, complete the entire course, and receive a 70% or higher on the Intro to Thematic Investing Quiz.

Questions on receiving CE credit may be sent to: Education@globalxetfs.com

KEEP UP WITH THE LATEST RESEARCH FROM GLOBAL X

To learn more about the disruptive themes changing our world, read the latest research from Global X, including:

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Category: Articles

Topics: Consumer Economy, Disruptive Technology, Technology

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Investing involves risk, including the possible loss of principal. There is no guarantee the strategies discussed will be successful. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume. Narrowly focused investments may be subject to higher volatility. There are additional risks associated with investing in lithium and the lithium mining industry. The investable universe for thematic ETFs may be limited. The funds are non-diversified.

Video Game and Esports and Cybersecurity Companies are subject to risks associated with additional regulatory oversight with regard to privacy/cybersecurity concerns, shifting consumer preferences, and potential licensing challenges. Declining or fluctuating subscription renewal rates for products/services or the loss or impairment of intellectual property rights could adversely affect profits. Thematic companies may have limited product lines, markets, financial resources or personnel. They typically engage in significant amounts of spending on research and development, capital expenditures and mergers and acquisitions.

Investments in infrastructure-related companies have greater exposure to the potential adverse economic, regulatory, political and other changes affecting such entities. Healthcare, Pharmaceutical, Biotechnology and Medical Device companies can be affected by government regulations, expiring patents, rapid product obsolescence, and intense industry competition. The risks related to investing in cloud computing companies include disruption in service caused by hardware or software failure, interruptions or delays in service by third-party data center hosting facilities and maintenance providers, security breaches involving certain private, sensitive, proprietary and confidential information managed and transmitted by cloud computing companies, and privacy concerns and laws, evolving Internet regulation and other foreign or domestic regulations that may limit or otherwise affect the operations of such companies.

POTX’s investments are concentrated in the cannabis industry, and the Fund may be susceptible to loss due to adverse occurrences affecting this industry. The cannabis industry is a very young, fast evolving industry with increased exposure to the risks associated with changes in applicable laws (including increased regulation, other rule changes, and related federal and state enforcement activities), as well as market developments, which may cause businesses to contract or close suddenly and negatively impact the value of securities held by the Fund.  Cannabis Companies are subject to various laws and regulations that may differ at the state/local, federal and international level. These laws and regulations may significantly affect a Cannabis Company’s ability to secure financing and traditional banking services, impact the market for cannabis business sales and services, and set limitations on cannabis use, production, transportation, export and storage. The possession, use and importation of marijuana remains illegal under U.S. federal law. Federal law criminalizing the use of marijuana remains enforceable notwithstanding state laws that legalize its use for medicinal and recreational purposes. This conflict creates volatility and risk for all Cannabis Companies, and any stepped-up enforcement of marijuana laws by the federal government could adversely affect the value of the Fund’s investments. Given the uncertain nature of the regulation of the cannabis industry in the United States, the Fund’s investment in certain entities could, under unique circumstances, raise issues under one or more of those laws, and any investigation or prosecution related to those investments could result in expense and losses to the Fund.

Investing in securities engaged in the social media industry include disruption in service caused by hardware or software failure; interruptions or delays in service by third-parties; security breaches involving certain private, sensitive, proprietary and confidential information managed and transmitted by social media companies; and privacy concerns and laws, evolving Internet regulation and other foreign or domestic regulations that may limit or otherwise affect the operations of such companies.

Information Technology companies can be affected by rapid product obsolescence, and intense industry competition. Risks include disruption in service caused by hardware or software failure; interruptions or delays in service by third-parties; security breaches involving certain private, sensitive, proprietary and confidential information managed and transmitted; and privacy concerns and laws, evolving Internet regulation and other foreign or domestic regulations that may limit or otherwise affect the operations. Healthcare, Pharmaceutical, Biotechnology and Medical Device companies can be affected by government regulations, expiring patents, rapid product obsolescence, and intense industry competition.

Carefully consider the Funds’ investment objectives, risk factors, charges, and expenses before investing. This and additional information can be found in the Funds’ summary or full prospectus, which may be obtained by calling 1.888.493.8631, or by visiting globalxetfs.com. Please read the prospectus carefully before investing.

Global X Management Company LLC serves as an advisor to Global X Funds. The Funds are distributed by SEI Investments Distribution Co. (SIDCO), which is not affiliated with Global X Management Company LLC or Mirae Asset Global Investments. Global X Funds are not sponsored, endorsed, issued, sold or promoted by Solactive AG, nor does Solactive AG make any representations regarding the advisability of investing in the Global X Funds. Neither SIDCO, Global X nor Mirae Asset Global Investments are affiliated with Solactive AG.

Shares of ETFs are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. This information is not intended to be individual or personalized investment or tax advice and should not be used for trading purposes. Please consult a financial advisor or tax professional for more information regarding your investment and/or tax situation.