What You Need To Know
ARK Invest believes that advancements in technology have the potential to accelerate economic growth significantly. The investment management firm predicts that during the current business cycle, real GDP growth could reach an average of 7% per year, surpassing any previous year since 1950. This estimate may seem far-fetched, but it aligns with historical periods of technologically driven innovation that have transformed economic growth over the past 2,000 years.
ARK Invest uses historical data to demonstrate how technology breakthroughs have continuously improved economic growth rates. For instance, the development of the waterwheel and advanced infrastructure in the first thousand years AD would have led to a 10-fold increase in GDP over 16,500 years. From 1 AD to 1500, agricultural innovations in Europe, such as introducing a plow for heavy soils, would have achieved the same growth in 1,600 years.
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During subsequent periods like the industrial revolutions, the introduction of steam engines, internal combustion engines, telephones, electrification, and the railroad further reduced the time for a 10-fold increase in GDP. In the second half of the 20th and early 21st centuries, advancements in integrated circuits, personal computers, and the internet compressed the timeframe to around 65 years.
In contrast, consensus forecasting agencies predict a slower growth trajectory, disregarding the impact of innovations like robotics, energy storage, artificial intelligence, blockchain technology, and multiomics sequencing. ARK Invest's forecast suggests that these technologies will significantly impact growth, with a projected timeframe of approximately 30 years for a 10-fold increase in economic well-being as measured by real GDP.
ARK Invest stands by its forecast based on research indicating that a subset of the 14 technologies they have modeled could drive the acceleration in GDP growth. Adaptive robotics and robotaxis alone have the potential to achieve the expected transformational acceleration.
Other advancements in AI software, public blockchains, and multiomics sequencing could also contribute to economic transformation, even though macroeconomic statistics may not fully capture their impacts. ARK Invest believes that these technological breakthroughs will not only transform the global economy but also have significant implications for financial markets.
Why This Is Important for Retail Investors
Investment Opportunities: Understanding the potential for accelerated economic growth driven by technological advancements allows retail investors to identify and capitalize on investment opportunities that may arise in sectors related to robotics, AI, energy storage, blockchain, and more. This knowledge can help them align their investment strategies with the expected shifts in the global economy.
Portfolio Diversification: Recognizing the transformative impact of technology on the economy enables retail investors to diversify their portfolios beyond traditional sectors. By adding exposure to innovative and disruptive technologies, investors can potentially enhance their returns and reduce risk through a more balanced and forward-looking investment approach.
Long-Term Investment Planning: Retail investors can incorporate this understanding of technology-driven economic growth into their long-term investment planning. By recognizing that these advancements have the potential to reshape the economic landscape, investors can adjust their investment horizons, goals, and strategies accordingly to maximize their wealth accumulation over time.
Staying Ahead of the Curve: Keeping abreast of the latest trends in technology and their impact on the economy empowers retail investors to stay ahead of the curve. Being aware of the potential for accelerated growth can help them make informed investment decisions and remain competitive in the ever-evolving investment landscape.
Education and Empowerment: Understanding the relationship between technology and economic growth empowers retail investors with knowledge and insights. By educating themselves on these topics, investors can make more informed and confident investment decisions, taking control of their financial future and potentially achieving greater financial success.
How Can You Use This Information?
Here are some of the investing ideas that can be explored using this information:
Growth Investing
Retail investors can explore growth investing strategies by identifying and investing in companies operating in sectors expected to benefit from technological innovations and the resulting economic acceleration.
Growth investing focuses on stocks of companies expected to grow at an above-average rate compared to other stocks in the market; learn more in our article titled 'What is Growth Investing?'.
Thematic Investing
With knowledge of the transformative impact of technology, retail investors can pursue thematic investing approaches focused on specific technological themes, such as robotics, artificial intelligence, energy storage, or blockchain, to align their portfolios with long-term growth opportunities.
Thematic Investing selects assets based on projected trends or themes that offer growth opportunities.
Innovation-Focused Investing
Understanding the potential for technological breakthroughs and their impact on economic growth allows retail investors to focus their investments on companies at the forefront of innovation, providing opportunities for potential long-term growth.
Innovation-focused investing seeks out companies that are leaders in technological advancement, offering potential for significant growth as they develop new products and services.
Sector Rotation
Retail investors can consider sector rotation strategies by analyzing which sectors are likely to benefit the most from technological advancements and economic acceleration, and actively adjusting their portfolios to capitalize on these trends.
Sector Rotation is the practice of shifting investment capital from one industry sector to another to take advantage of the economic cycle.
Geographic Diversification
Recognizing the global nature of technological advancements, retail investors can explore geographic diversification strategies to gain exposure to international markets at the forefront of technological innovation and expected economic growth.
Geographic Diversification expands a portfolio's reach by investing in assets across different regions to mitigate the risk associated with any single country.
Read What Others Are Saying
ARK Invest: Big Ideas 2024
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What you should read next:
Warren Buffett's Letter: Berkshire's Stability & Long-Term Outlook
Warner Bros. Discovery (WBD) Q4 Revenue Falls Short of Expectations
Popular ETFs
Some investors prefer to invest in stocks via an exchange-traded fund for ease and reduced risk. Given ARK Invest's focus on innovation and technology as key drivers of economic growth, here are some specific ETFs from ARK that align with their investment thesis:
ARK Innovation ETF (ARKK): Targets companies that ARK believes represent the cornerstone of innovation across sectors like AI, robotics, energy storage, DNA sequencing, and blockchain technology.
ARK Autonomous Technology & Robotics ETF (ARKQ): Invests in companies involved in autonomous vehicles, robotics and automation, 3D printing, and energy storage, which are seen as pivotal in transforming the future economy.
ARK Next Generation Internet ETF (ARKW): Focuses on companies that are advancing internet-based products and services—cloud computing, e-commerce, big data, AI, mobile technology, and social platforms.
ARK Genomic Revolution ETF (ARKG): Concentrates on companies in the genomic industry, including CRISPR, gene editing, therapeutics, agricultural biology, and health care innovations, which could drive significant advancements in medical and biological fields.
ARK Fintech Innovation ETF (ARKF): Targets financial technology innovations such as mobile payments, digital wallets, peer-to-peer lending, blockchain, and risk transformation, reflecting the changing landscape of the financial sector.
These ETFs encapsulate ARK Invest's vision for investing in disruptive technologies and innovations that have the potential to drive significant economic growth and transformation across various sectors.