Beyond Bulls & Bears

Equity

Quick Thoughts: The Birth of Global Tech Continues

From cloud computing and automation to self-driving cars, technology continues to be one of the world’s hottest sectors. Our Chief Market Strategist Stephen Dover and Portfolio Managers Donald Huber and John Remmert believe active investing in technology and innovation is a global story, and government support and spending in next-generation technologies is likely a long-term positive.

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Some argue the computer was invented when Englishman Charles Babbage conceived the first programmable, general-purpose computer, while others reason Englishwoman Ada Lovelace, who wrote the first computer programme, is the computer’s true creator. Many debate technological births, yet likely agree that computers and technology continue to transform our daily lives. From today’s cloud computing to self-driving cars, technology continues to be one of the world’s hottest sectors.

  • President Joe Biden’s administration’s US$2 trillion infrastructure plan includes accelerated technology investment​s. Tech could benefit from increased purchases of servers, storage, networking hardware and software, and investments in data-centre colocations.
  • Broadband and fifth-generation technology (5G) investments​ may get a boost from lower-cost broadband dissemination in ‘broadband deserts’ (rural and urban environments). There could be an expansion of the US Rural Digital Opportunity Fund.1
  • Internet privacy and data legislation, similar to Europe’s 2018 General Data Protection Regulation (GDPR), is likely.
  • Technology and innovation are reshaping old-line industries. Industrial, materials, and energy firms are increasingly adopting software and automation solutions to better manage their businesses. Materials companies use scientific data and analytic tools to help address global needs in health and nutrition, and sustainability.
  • The global pandemic accelerated technology and innovation trends that we expect to persist. Many non-US companies have continued to help drive this innovation through services, software, and advanced semiconductors.
  • While they may not be dominant from a market-capitalisation perspective, a significant number of investable, smaller, and high-quality international technology companies are just as innovative and fast-growing as the US companies garnering much attention in recent years.

Active investing in technology and innovation is a global story, as Franklin Equity Group Portfolio Managers Donald Huber and John Remmert discuss in There’s Much More to Tech Investing than the US Market. We believe government support and spending in next-generation technologies (5G, artificial intelligence, etc.) amongst other major secular trends could be a longer-term positive.

 

What Are the Risks?

All investments involve risks, including possible loss of principal. The value of investments can go down as well as up, and investors may not get back the full amount invested. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments. The technology industry can be significantly affected by obsolescence of existing technology, short product cycles, falling prices and profits, competition from new market entrants as well as general economic conditions. Smaller and newer companies can be particularly sensitive to changing economic conditions. Their growth prospects are less certain than those of larger, more established companies, and they can be volatile. Past performance does not guarantee future results.

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1. The Rural Digital Opportunity Fund resources the deployment of high-speed fixed broadband service to rural homes and small businesses that lack it.

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