UBS || VIX (מדד התנודתיות של בורסת שיקגו) || מדגיש את הצורך להתמודד עם סיכון הבחירות בארה"ב

 

 

We are on the cusp of a major 5G upgrade cycle, with penetration rates still only in the low single digits.

• 5G connections offer 20x faster speed and 90% lower latency than 4G, enabling a multitude of emerging technologies over the next decade. We expect a 20x rise in annual 5G capex spending to USD 150bn in 2025, from USD 7.5bn in 2019.

• 5G offers multi-year opportunities across many industries, including both enablers and platform companies. We call this the 5G+ investment opportunity, with enablers benefiting from a pickup in capex spending and platform companies benefitting from the economic value created at the later stages.

 

The 5G era is upon us. With 5G, connections are expected to be 20x faster than 4G and latency 90% lower.

Such magnificent power could enable applications that weren’t feasible before because of 4G’s limitations (i.e., atency is too high). Fixed wireless access, utonomous  driving, immersive augmented and virtual reality (AR/ VR) technologies, artificial intelligence, telesurgery, massive industrial Internet of Things (IoT), data-driven agritech and highly connected smart cities are areas that we think will ascend in this new age.

5G offers investment opportunities across many years and industries, including both enablers and platform companies, in our view. We call this the 5G+ investment opportunity, with enablers benefiting from a pick-up in capex spending and platform companies benefitting from the economic value created at the later stages.

5G enablers consist of companies that manufacture, install and maintain the equipment needed for the network build-out. This pre-dominantly involves semiconductor equipment producers, various segments of semiconductor manufacturers, telecom and networking equipment suppliers, and tower operators and telecom service providers. With an expected 20x rise in annual 5G capex spending from 2019 (USD 7.5bn) to 2025 (USD 150bn), we believe the structural leaders in the respective 5G value chain stand to benefit from the multi-year pick-up in spending.

But we think more substantial upside lies with 5G platform beneficiaries, which include leaders in smart

mobility, cloud, gaming, media & entertainment, and endproduct manufacturers. Akin to how cloud technology today favors cloud platform companies and their ancillary service providers more than hardware companies, with 5G becoming more mature, we see outsized gains for platform leaders capable of successfully building 5G use cases.

 

 

 

 

Thought of the day

VIX contracts are implying a significant pickup in volatility around the US election, with the largest gap on record between the current VIX level and the

second-month contract, which expires just ahead of the US vote. The gauge of implied US equity volatility is near 26.6, while the second month contract

is trading at around 35.2. This 8.8pt spread is the largest since data started being collected in 2004.

But while election risks can be seen most clearly in implied S&P stock volatility, the US vote will have implications globally and across a range of asset classes.

Since the result of the vote remains hard to call, we believe investors can prepare their portfolios for various outcomes:

1. A Blue Wave: In the event of a Democratic sweep of the presidency and both houses of Congress, we believe stocks exposed to Democratic presidential nominee Joe Biden's "green" agenda would benefit in the US  and around the world. Biden has announced plans to spend a sizable part of his USD 700bn recovery plan on the green agenda. The energy sector, on the other hand, could face tougher regulations that are only partially priced in, in our view. (For more on buying into the green recovery, click here.) Healthcare could suffer from bipartisan drug pricing rhetoric in the run-up to the vote, but should enjoy a relief rally afterwards, even in a Blue Wave. Overall, longterm themes that should benefit include companies involved in smart mobility and energy efficiency in the US, Europe, and Asia. In currency markets, we would expect a Blue Wave to accelerate the US dollar's decline, with Biden pursuing a less aggressive pro-growth agenda than President Donald Trump.

For more on positioning for US dollar weakness, click here. While we don't see the election as having a major impact on credit markets, the outcome

could impact spreads in specific sectors, such as energy, healthcare, and autos for the reasons stated above.

2. A Red Wave: In the event of a Republican sweep, we would see energy as the biggest winner, reflecting relief that the sector would likely avoid the

stricter regulations that the Democrats have proposed. We also expect a second Trump administration to maintain its tough line on trade, leading to

accelerated reshoring of production to the US. That could benefit companies involved in automation and robotics, including those in Europe and Asia.

Tariff threats would remain a risk for European and Asian exporters. In foreign exchange, we believe the US dollar would remain under pressure given the narrowing of the US rate advantage. But we would expect a Red Wave to slow the pace of US dollar depreciation. That is because a second Trump term

would likely be notable for a dollar-positive mix of tax cuts, fiscal spending targeted at infrastructure, and deregulation.

3. Election agnostics: For investors looking to maintain equity exposure without adding significant policy or headline risk, we see opportunities in longer-term themes that are unlikely to be significantly affected by the outcome. We think enabling technologies, which stand to grow swiftly regardless of the outcome of the November vote, have strong potential.

 

These technologies include artificial intelligence, augmented reality, virtual reality, big data, cloud computing, and 5G, which together could grow at

double-digit rates on average over the next few years, by our estimates. For more on themes accelerated by COVID-19, click here.

Prediction markets now see a roughly 60% chance of a changing of the guard in 2021, and even a roughly 50% chance of a Democratic sweep of the House and Senate as well. However, such markets have not had a strong track record of correctly predicting results recently. Given the uncertainty of the outcome, our equity basket approach enables investors to adjust their portfolios to reflect the major policy issues. For more details, please see our range of publications on how to position for the US election in various regions, including our latest research on "European investment implications of the 2020 US elections." 

 

Caught our attention

• Clean and green. Consumer goods group Unilever has said it will spend EUR 1 billion in cutting out ingredients made from fossil fuels from its

laundry and cleaning products. The company said it was looking to phase out such chemicals over the coming decade, its first initiative of this scale

for cleaning products. The announcement is part of a broad trend by companies around the world and in various sectors to reduce their carbon

footprint. Meanwhile, an analysis in the Wall Street Journal calculated the world's top 50 economies were putting USD 583bn into boosting green

efforts. We believe this will create a range of opportunities for investors in themes such as smart mobility, renewables, and the food revolution.

 

• Vaccine roundup. The US CDC has asked state officials to prepare for the possibility of limited vaccine distributions to high-risk groups as soon as 1 November, according to documents obtained by the NYT.

The CDC document is said to describe two vaccine candidates that match efforts by Pfizer and Moderna, both of which are in late-stage trials. Separately, the FDA on Wednesday promised independent experts would review vaccine candidates, in a nod to concerns over vaccine politics into the 3 November US presidential election. Elsewhere, Italy's health minister suggested AstraZeneca's candidate vaccine could hit the market by the year-end, while the COVAX alliance announced 76 rich countries had signed on to the equitable distribution initiative. In our central scenario, we expect widespread vaccine availability by the second quarter of 2021. Broadly, we view the healthcare sector as a good portfolio diversifier, with less disruption from the pandemic and an attractive long-term outlook due to an aging global population.

We see opportunities in the health technology, genetic therapies and oncology spaces.

 

• Border clash, digital retaliation. India on Wednesday banned 118 more Chinese-linked mobile apps it says were “prejudicial to sovereignty,” marking the second such digital retaliation over a simmering border dispute. Earlier in the week, India accused China of “provocative actions” along the high-altitude Himalayan border where physical clashes in June left at least 20 soldiers dead. Among the apps banned in this round are Xiaomi’s in-built browser distributed on its phones as well as the very popular PUBG multiplayer battle game distributed by China’s Tencent. Tech retaliation offers India an asymmetric response to geopolitical tensions with China, given the relative imbalance in cross-market tech exposure. While it’s unclear if this will move the needle on border tensions, we suspect it will negatively weigh on Chinese tech investments into India as long as diplomatic relations remain strained. On the other hand, US tech giants have ramped up investment in India in recent months and could benefit from pressure on Chinese players. India is one of our most preferred equity markets within Asia, with earnings growth forecast to rise around 11.5% annually over the next decade.