The Federal Reserve hasn’t officially raised interest rates, but some investors are already jittery regarding the impact that will have on growth stocks, particularly those that fall into the disruptive/innovative camp.
It’s worth remembering that disruption will occur regardless of what the Fed does and that while rate tightening can pinch growth stocks over the near term, the long-term outlook for assets such as the Goldman Sachs Future Tech Leaders Equity ETF (GTEK) remains attractive.
Central bank action notwithstanding, disruption is occurring across myriad industries, and the Fed isn’t going to stop that. It can’t, and investors need efficient, nimble access to marquee disruptive themes. GTEK, which debuted last September, accomplishes that objective.
As Goldman Sachs Asset Management (GSAM) points out in its recent 2022 investment ideas report, nearly everything is subject to “technification.” GTEK is one of the exchange traded funds levered to that theme,
“In the financials sector, fintech companies and cryptocurrencies are challenging the traditional business models of banks,” says GSAM. “Consumer and media industries have been upended by the shift to online shopping, gaming, and social media. The healthcare sector is being transformed by technology while machines are now connected through the internet of things. The metaverse may disrupt the way we interact with the internet itself.”
In the report, GSAM brings up an interesting point: Disruption is rapidly spreading. It’s not a theme confined to domestic large- and mega-cap stocks. Along those lines, GTEK allocates nearly 39% of it weight to ex-U.S. equities, and its lineup isn’t littered with the likes of Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN). Rather, GTEK holdings are companies with the potential to become the next storied stocks.
“Technological innovation, which may continue to be a prominent disruptive force as it spreads beyond large cap tech to small cap and outside the US, especially to EMs; as technology is applied to new industries it will create new markets for growth,” adds GSAM.
GTEK’s international exposure is relevant because investors should want access to alpha-generating opportunities in foreign markets. Additionally, some market observers believe that this could be the year when U.S. equities offer more subdued returns relative to international markets. Not to mention, some regions outside of North America offer better demographic traits, which is favorable for disruptive growth companies.
“Millennials—the majority of whom are located in EMs—are now the largest population group and have the greatest earnings power, both of which will continue to influence global consumption, including investing,” concludes GSAM.
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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.