By Luis Berruga, Chief Executive Officer of Global X ETFs
Investors can make the most of their portfolios in any economic situation if they know where to look. Take the current investing landscape. It has offered more questions than answers so far this year with persistent elevated inflation, ongoing geopolitical tensions and recessionary concerns.
Despite this, there are bright spots within the market that are fueling growth and opportunity. These solutions can help investors diversify their portfolios and build resistance to volatile economic conditions.
Leveraging Digital Technology, Innovation
Technological innovation has long been a key driver of economic growth, shaping and disrupting the ways in which we work, learn, create and connect. Perhaps the most notable, recent example of this can be found by looking at generative AI, the most powerful and consumer-friendly AI model to date.
But there’s a bigger story here for investors. Large language models – like ChatGPT – are evolving at a rapid pace and have the potential to drive the next era of innovation and revolutionize a myriad of industries, from healthcare to manufacturing to entertainment to banking and more. This creates industry-agnostic growth potential for investors.
Additionally, there’s ample opportunity for investors to tap into the many companies that benefit from the AI boom, including hardware manufacturers. Look at chipmaker Nvidia, whose graphics processors power AI applications. The chipmaker became the fifth publicly traded U.S. company to hit $1 trillion in market cap in late May, joining the ranks of technology behemoths like Apple, Microsoft, Alphabet and Amazon.
Nvidia is a great example of how enterprises are capitalizing on this mega-trend, even as IT spending may be down in some areas. What’s more, as AI adoption picks up, the broader technology sector is expected to benefit, particularly within areas like cloud computing, cybersecurity, digital media and digital commerce.
Capitalizing on the Clean Energy Transition
The adoption of renewable energy is accelerating, particularly as net-zero emission deadlines inch closer. Coupled with these deadlines, consumer pressure is mounting and recent research found the majority of consumers (80%) indicated they care about the use of renewable energy.
Amidst this backdrop, the investment opportunities are vast for clean technologies and other climate change-related industries – including wind and solar energy, as well as low-carbon hydrogen.
I’m particularly excited about electric vehicles (EVs), which are the focus for many traditional automakers. In fact, a recent analysis found that automakers have forecast plans to build 54 million battery EVs in 2030, representing more than half of total vehicle production. Excitingly, we’re already seeing progress! In 2022, EVs accounted for 5.8% of all new cars sold in the U.S., an increase from 3.1% the year before. This represents a tremendous opportunity for investors to get involved in this growing industry.
The excitement was on full display during this year’s Super Bowl, the most-watched Super Bowl of all time. While automaker ad spots were down overall this year, an analysis from Cars.com revealed that 75% of the big game’s car ads featured an EV.
Although adoption challenges like supply and charging infrastructure remain, the younger generation of drivers remains interested in this trend too: a recent survey found that over half (58%) of Gen Z plans to switch to EVs in the next five years.
Maintaining Flexibility Through Income Investing
It’s clear that despite the exciting opportunities presented by new innovations such as AI and EVs, there is still an appetite for stability. Even as some worries ease regarding inflation, investors ultimately want to feel secure.
This is where incoming investing can play a tremendous role in diversifying portfolios and presenting unique ways to capitalize on market trends. Income investing focuses on creating an investment portfolio that allocates some (or even all) of its allocations to products that yield regular, consistent streams of income. This can be a wide array of products including bonds, stock dividends and certificates of deposit. These products can potentially offer downside risk mitigation and hedge protection.
There are many different ways to tap into income investing and each strategy has its own way of potentially generating returns. Let's take options-based strategies as an example. These strategies can help investors in periods of market stress or turbulence by offering varying levels of upside potential and downside risk mitigation.
At the end of the day, macroeconomic conditions are out of our control. What we can control, however, is where we focus our energy and find opportunities. Every single environment has its gem and savvy investors will leave no stone unturned to find it.
Luis Berruga
About the author:
Luis Berruga is Chief Executive Officer of Global X ETFs, a New York-based provider of Exchange Traded Funds (ETFs) with more than $40 billion in assets under management and over one million investors across more than 90 countries. Luis joined Global X in 2014 as Chief Operating Officer & Chief Financial Officer. In 2018, he was named Chief Executive Officer. He is responsible for advancing Global X’s market leadership in providing intelligent investment solutions, leading the senior management team to drive execution across all functional areas, and driving the planning and implementation of the firm’s strategic vision. Luis has been instrumental in developing the infrastructure for Global X to be a leading ETF issuer, not just in the US, but in key ETF markets around the world. Over the past few years, Global X has expanded beyond the US to Asia, Latam, Europe and Australia.
Prior to joining Global X, Luis served as an Investment Banker in the Financial Institutions Group at Jefferies, where he advised boards of directors and executive management teams of public and private companies on acquisitions, divestitures, and capital raises. Before that, Luis was at Morgan Stanley, where he focused primarily on technology and operations strategic planning within the Wealth & Asset Management Group.
Luis is a native of Spain. He earned his bachelor’s degree in Telecommunications Engineering at the Universidad Politecnica de Madrid and his MBA from the Kellogg School of Management at Northwestern University. He is an avid sports fan, specifically basketball and tennis, as well as an accomplished chess player. He roots for Real Madrid and is a huge fan of Rafael Nadal.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.