Megatrends and secular themes require patience because it can often take years for these trends to play out. However, investors’ patience was tested last year as once-beloved disruptive growth stocks stumbled, serving as a reminder that no theme — no matter how compelling — moves higher in linear fashion.
On the bright side, the longer-ranging thesis for megatrends and themes remains, but identifying which disruptive theme will work and when is a tricky endeavor. Avoiding that risk highlights the benefits of an exchange traded fund such as the ALPS Disruptive Technologies ETF (DTEC).
DTEC, which follows the Indxx Disruptive Technologies Index, provides investors with exposure to 10 disruptive themes — a trait that’s relevant at a time when multiple megatrends continue accruing momentum. Those include shifts in consumer behavior, the ongoing need for clean technology expansion, and the depth of disruption.
Focusing on global decarbonization efforts, which DTEC is levered to by way of its clean energy and smart grid exposure, net-zero plans are being unveiled by companies and governments the world over, and to get there, massive spending is required.
“It’s fair to say that the developed world is accelerating its efforts to reduce carbon emissions. Still, this is a tall order. To reach net zero by 2050, carbon emissions would need to start falling by about 8% per year. Even during 2020, when COVID-19 lockdowns limited mobility and global GDP shrank, emissions fell only 5%,” according to Morgan Stanley research.
DTEC is all the more relevant on the clean tech front because as noted above, decarbonization is a global theme. DTEC is a global fund, as more than 34% of its geographic exposure is outside the U.S. Of course, the U.S. is a leader in clean tech and renewable energy adoption.
“With the recent passing of the Inflation Reduction Act, which provides significant federal support for wind, solar, hydrogen, energy storage and carbon capture, there is potential for long-term growth in this sector,” added Morgan Stanley.
Another benefit of DTEC’s depth is that it positions investors to capitalize on long-term intersections of disruptive technologies with each other and the intersections of old guard industries with next generation technologies.
“Some examples of these opportunities include embedded finance changing the consumer experience and payments, tokenized assets allowing for greater global financial inclusion, the modernization of healthcare data ownership and biopharma research and development breakthroughs,” concluded Morgan Stanley.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.
