Editor's Note: Michael's paid-up Nova-X Report readers got a briefing on four huge tech catalysts for next year, plus even more great research recommendations to play them. (Click here to learn how to subscribe.) We'd like to share two of the biggest with you today. Here's Michael...
The other day I ran into a friend of mine, Mark, at the athletic club we frequent.
As we chatted, the subject of our conversation naturally shifted to the investing climate for 2019 - something I've been thinking about a lot lately.
So I started regaling Mark with stories about some of the exciting advances that will drive not just high-tech stocks higher, but the overall U.S. economy.
Then suddenly, Mark paused and asked, "Yeah, but aren't we going to have a recession next year?"
Now, I'm sharing this anecdote with you because I've been hearing a lot of people use the dreaded "R" word these days. I've lost track of how many times I've seen predictions of a recession in 2019. In fact, some of those predictions go all the way back to at least 2016, making this a bit of a cottage industry.
Most of these dire predictions have been based on simple calendar math, rather than the fundamentals.
Fact is, we will mark the 10th anniversary of the official end of the last recession in June. So, many pundits are predicting that we are bound to have another one in 2019, simply because the average period between these kinds of downturns is 6.5 years.
But the so-called experts are glossing over some very important economic data that I believe show we are not likely to have two quarters in a row of negative GDP in 2019 - the official definition of a recession.
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I'm actually optimistic about our ability to make money on tech stocks in the New Year. And I've identified two major catalysts that will lead to a tech rebound over the next 12 months...
Tech and the U.S. Economy Are Intertwined
I'm bullish on technology and the broader economy, but there are some other, macro forces that give me optimism, too.
So let's take a look before we pay a visit to "Fort Silicon Valley":
- Tech stocks are greatly oversold, with some giants that practically print money down by more than 20% since October, putting them in bear market territory. I believe a rebound is at hand.
- The economy is in overall great shape. We have the best job climate in decades, and consumer confidence is near 15-year highs.
- Corporate earnings are on fire, especially among high-profit tech leaders. Zacks says S&P 500 company earnings in the third quarter were up 25.7% from the same period last year on 8.4% higher revenue.
- Businesses just got the biggest tax cut in decades, which has been particularly helpful for tech since that sector already had high profit margins.
- The World Economic Forum says the United States has the most competitive economy on Earth.
- We just celebrated two great quarters of GDP, which rose 3.5% in the third quarter, following 4.2% in the second. That's the best back-to-back growth we've had in four years.
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Please don't think I'm being naive. I know full well that we face one major challenge this year - a possible trade war with China. At deadline for this report, the negotiations between the world's two largest economies remain fluid.
So it's impossible to predict exactly how things will play out. But it's worth noting that neither side would fully win in a trade war, that's for sure. China needs access to our market, and we need the Chinese to continue buying the bonds that help fund government spending.
So, here's a prediction: I'm forecasting slower economic growth this year, between 2.5% and 2.8%, in no small measure because fears of a trade war have folks feeling unsettled.
U.S. President Donald Trump has greatly contributed to this by slapping tariffs on some $200 billion in Chinese goods and by going after U.S. firms that want to expand overseas rather than produce here at home.
I agree this may be one of the only ways to get the Chinese to further open their markets and stop stealing our intellectual property. But a trade dispute is still bad for businesses and investors, no matter how you measure it.
Meanwhile, I'm calculating higher interest rates this year as having only a modest negative effect. Yes, the U.S. Federal Reserve will almost assuredly raise rates twice in 2019, but inflation remains pretty much in check at around 2% to 2.5%, and the central bankers have no desire to push us into an artificial recession.
Now for the good news... tech will once again beat the broader market in 2019, as it has since the bull market began in March 2009.
After all, the United States is now clearly a tech-centric economy.
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And as you'll see, several tech fields are poised for big gains this year. But there are at least two major tech catalysts on the horizon in particular that will drive the rebound.
Let's check them out:
"Fort Silicon Valley" Catalyst No. 1: Artificial Intelligence
When I last spoke to my Nova-X Report subscribers, I told them that the 60-year "winter" of artificial intelligence (AI) had come to an end.
After all, giving computers and mobile devices better and more human-like insights for users is an unstoppable trend.
AI is now seeping into every aspect of our lives, from how we interact with our voice-activated digital assistants to how biopharma finds new drugs.
And this year marks a major inflection point in the reach of AI and the closely related branches of machine and deep learning. Big business is moving quickly to embrace AI to create better products at lower costs and to quickly provide valued-added data science.
Consider that in 2019, Boeing Co. (NYSE: BA) is expected to make big inroads on an AI initiative it launched a little more than two months ago. AI is now housed inside a Boeing business unit that is using the technology to make further inroads in advanced computing for commercial and government clients.
Hewlett Packard Enterprise Co. (NYSE: HPE) says AI is becoming a critical component of how every company in the United States intends to migrate to digital platforms. The company forecasts that by the end of this year, AI will fuel 41% of those transformations.
No wonder a recent study by Accenture found that in 12 advanced economies with combined GDPs of roughly $61 trillion, AI can double economic growth by 2035. Part of that bump will come from a 40% boost in productivity.
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Tractica analyzed nearly 300 different AI applications and found that this field is perfect for large organizations known as enterprise clients.
That's why this year, AI will really join forces with another critical technology for the U.S. economy - cloud computing.
MarketsandMarkets says AI as a Service (AIaaS) will be a big driver of a market that will grow more than 36% a year - and be worth $190.61 billion - by 2025.
Analysts say the number of firms offering either machine learning or AI as a service could double this year, from roughly 25 to 50. The idea is to make AI available as part of a client's cloud-subscription services.
That translates to a huge increase in the scale of the AI opportunities lying in store in 2019 - and a significant shot in the arm for the economy.
"Fort Silicon Valley" Catalyst No. 2: Robotics & Autonomous Vehicles
After nearly 10 years of testing and 5 million miles of driving, Google is finally ready to torpedo the family car as we know it.
Google's autonomous car unit, Waymo, will launch a robo-taxi service in Phoenix in a matter of months. It's a big win for the parent company, Alphabet Inc. (NASDAQ: GOOGL), which was met with wide skepticism when it headed down this road in 2009.
To be sure, the firm's self-driving automobile, Waymo One, will have a limited release. But after this shakedown period, Waymo One will cover metro Phoenix and then other large cities where mobile ride-hailing has become popular.
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There's a lot more going on here than a proof of concept. Fact is, a lot of money is hanging in the balance.
Intel and Strategy Analytics predict that driverless cars will have a total economic value of $7 trillion by 2050. That forecast assumes that nearly all of the 75 million cars produced around the world will have autonomous technology.
But that's only a part of the story. Fact is, much more than self-driving cars, autonomous devices are all around us and gaining ground on a daily basis.
In the year ahead, robotic systems face rapid acceleration in the United States. And one key driver comes from demographics - there are now more jobs open than there are workers to hire as Baby Boomers retire more quickly than millennials can take their place.
The global robotics and automation sector will be worth $135 billion this year, according to a forecast from International Data Corp. And Statista believes that market will hit $498.6 million in 2025.
Two trends driving such growth are:
- Collaborative robots that are smaller and device-agnostic. Armed with a bevy of sensors, they can perform a wide range of tasks and can easily be deployed alongside humans. The Robotics Industry Association says "cobots," as they're called, will be worth 34% of the market by 2025, a 10-fold increase from today.
- Service robots are used in offices, logistics centers, automated delivery vehicles, mobile factories, and medicine. Mordor Intelligence says this field will grow by 18% a year through 2023, when the segment will be worth $28.6 billion.
You can bet we'll be watching this trend closely this year as we look for the best ways to profit.
Now, when you consider all the factors we've discussed today, I hope you can agree that tech is brimming with exciting opportunities for 2019.
And as I told my friend Mark at the sports club before we parted ways, rest assured. These major catalysts that will not only block us from a recession, but prepare us for a tech rebound and long-term trends worth trillions of dollars. That means each presents us with an opportunity to capture big profits for years to come.
I'm fired up, excited to jump on as many quality opportunities as possible for my readers, to continue our string of market-crushing winners in the New Year.
The bottom line is, forget about the "R" word. 2019 is going to be all about the "M" word - money.
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About the Author
Michael A. Robinson is a 36-year Silicon Valley veteran and one of the top tech and biotech financial analysts working today. That's because, as a consultant, senior adviser, and board member for Silicon Valley venture capital firms, Michael enjoys privileged access to pioneering CEOs, scientists, and high-profile players. And he brings this entire world of Silicon Valley "insiders" right to you...
- He was one of five people involved in early meetings for the $160 billion "cloud" computing phenomenon.
- He was there as Lee Iacocca and Roger Smith, the CEOs of Chrysler and GM, led the robotics revolution that saved the U.S. automotive industry.
- As cyber-security was becoming a focus of national security, Michael was with Dave DeWalt, the CEO of McAfee, right before Intel acquired his company for $7.8 billion.
This all means the entire world is constantly seeking Michael's insight.
In addition to being a regular guest and panelist on CNBC and Fox Business, he is also a Pulitzer Prize-nominated writer and reporter. His first book Overdrawn: The Bailout of American Savings warned people about the coming financial collapse - years before the word "bailout" became a household word.
Silicon Valley defense publications vie for his analysis. He's worked for Defense Media Network and Signal Magazine, as well as The New York Times, American Enterprise, and The Wall Street Journal.
And even with decades of experience, Michael believes there has never been a moment in time quite like this.
Right now, medical breakthroughs that once took years to develop are moving at a record speed. And that means we are going to see highly lucrative biotech investment opportunities come in fast and furious.
To help you navigate the historic opportunity in biotech, Michael launched the Bio-Tech Profit Alliance.
His other publications include: Strategic Tech Investor, The Nova-X Report, Bio-Technology Profit Alliance and Nexus-9 Network.