There’s one big story at the heart of everything going on in the markets right now.
It isn’t China. It isn’t Greece. It is related to the drop in the oil price, but isn’t the oil price itself.
According to Vanguard’s head of quantitative equity, John Ameriks, the story is technology.
Amerik’s quantitative equity team manages $US24 billion and covers 17 mandates for Vanguard.
“What ultimately leads to growth and increased productivity are technological surprises and breakthroughs,” Ameriks told Business Insider.
“To the extent that things can be expected, they tend to be priced in pretty quickly. It’s news. These are developments that occur that people can’t predict.”
You might think the biggest surprise the past year has been the sharp drop in energy prices. But in Ameriks view, that story — and most market stories — are really about technology.
“That drop in oil prices is a function of both changes in technology and changes in expectations for growth,” he said.
But “it’s actually probably the technological changes and the developments in the industry that are longer-term in nature.”
At Vanguard, Ameriks said, his team’s strategy is not so much to pit one industry against another. It’s more about looking within industries to identify firms that show potential.
“We’re not intending to try to identify big mega-trends that we can somehow always be on the right side of,” he said. “What we try to do is diversify.”
Take the example of the energy industry.
“The ways in which we extract energy — there are completely new ways for us to do that that really change the cost structure in a particular industry,” Ameriks said. “That’s going to matter to particular firms. In the end, it’s great news for everybody — but that will drive what happens in markets.”
And we’re going to see more of this trend.
“The pace of change and the power of computing and the information that we have to work with continues to grow,” Ameriks said.