The Next Big Theme: January 2020

Electric Vehicles                                                         

CO2 emissions standards could rev EVs

Stricter carbon emission standards in Europe could help electric vehicles take a bigger share of the total car market. The CO2 emission target for new cars is now 95g CO2/Km, down from the average level of 120.4 g CO2/Km in 2018.1 At least 95% of new cars need to comply with this standard. If car manufacturers do not comply, they must pay a fine of €95 for each gram that exceeds the target, multiplied by the total number of cars they sell. For example, if a car manufacturer registers 1 million new vehicles that exceed the emission target by 5g CO2/Km, the fine would be a lofty €475 million. The EU began setting mandatory emission reduction targets for new cars in 2009.

IoT

Making your smart home smarter

Smart home product developers, including Amazon, Apple, and Google, among others, announced plans to develop and encourage a royalty-free connectivity standard called Project Connected Home over IP.2 The initiative seeks to enable compatibility between smart devices while keeping user data secure—a feature that consumers increasingly demand. For consumers, this initiative means communication between smart assistants, mobile apps and cloud services that may not be produced or provided by the same companies. For manufacturers, this means more seamless and less-nuanced production. Those involved hope additional manufacturers, silicon providers, and smart join the effort for more widespread adoption.

Cannabis

Another state gives cannabis the A-ok

On January 1, 2020, Illinois became the 11th state to legalize recreational cannabis. On the first day of legalization, the state saw nearly $3.2M of product sales across 77k transactions.3 Societal acceptance of cannabis continues to increase, and with that comes movements to remove old stigmas associated with the drug. One day before legal sales of recreational cannabis began in Illinois, Governor J.B. Pritzker announced that the state cleared the records of 11,000 people previously convicted of cannabis-related crimes.4 Support for recreational cannabis legalization is high, and more states are set to vote on legalization in 2020, including Arizona, Florida, New Jersey, New Mexico, New York and Vermont. Those states, with an aggregated population of approximately 47 million people, could represent a huge new untapped market.

eSports

No more games: eSports hit the public markets

On December 9, 2019, Astralis IPO’d on Nasdaq’s small-company Copenhagen exchange, becoming the world’s first eSports team to IPO. Denmark-based Astralis is the number one ranked team in online, first-person shooter game Counterstrike: Global Offensive. It boasts sponsorships with major companies, such as carmaker Audi and computer peripherals manufacturer Logitech. In recent months, Astralis reclassified as a media company and expanded into games, including League of Legends and FIFA.5 Astralis CEO Nikolaj Nyholm noted that while venture capital funding can help teams secure spots in eSports leagues, public market capital raising provides greater flexibility and allows founders to hold onto their shares.6

Artificial Intelligence

Volcanoes bursting with data

Approximately 800 million people live within the blast zones of the world’s 1,500 potentially active volcanoes. Many of these volcanoes are not monitored consistently.7 The lack of surveillance and data has researchers turning to artificial intelligence (AI) to help. Researchers at the University of Leeds found that they could use satellites to produce measurements of ground deformation, and then leverage AI to identify and signal volcanic unrest. AI to predict geological events could be a game changer for those in harm’s way, and lead to new economies based on preparedness and potential fallout.

Genomics

Attacking anxiety with science

A recent Brigham and Women’s Hospital study identified activity in more than 209 genes across three anxiety levels.8 Researchers put genetically-normal mice through several behavioral tests and identified those that performed least consistently. Researchers then used computational modeling and RNA sequencing to categorize the mice based on their genetics and behaviors. Among the genes found to be anxiety-related were ones associated with learning and memory, hormonal expression, and reproduction. Next steps include homing in on which of the identified genes are addressable via pharmaceuticals.9

U.S. Infrastructure

Higher ground needed in the Keys

Residents of the Florida Keys may face some difficult choices in coming years due to climate change, including whether to relocate. Officials released the results of multi-year study that estimates how much additional elevation roads will need to stay above water in the coming years. The study found that the capital needed is beyond what taxpayers could pay and that many roads will likely be abandoned. In one example, a three-mile strip of road would need an additional 2.2 feet of elevation to stay above water until 2045, at a cost of $128 million.10 Officials mentioned ferries and water taxis as new means of transport for Keys residents, though finding new sources of funding or cheaper ways to raise the roads remain possibilities.11

THE NUMBERS

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

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