The COVID-19 Pandemic Chronicles: Revolutions in the Making
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I recently found myself going over my personal finances and updating my estate documents. While I like to reevaluate my finances periodically, this year it was very different. The COVID-19 Pandemic has had a profound impact on all of us, in many different aspects, and has changed our lives forever. One thing I will never forget is where I was on March 12th, 2020.
I was in Saskatoon for work, the JUNOS were in town and they had just been cancelled, and my boss called instructing me to get on a plane and go home…"we're taking you off the road for a few weeks". A few weeks turned into a few months which turned into a year, and here we are in the second year of the global pandemic.
The COVID-19 Pandemic has ushered in some new norms in social behaviors such as physical distancing, the daily use of face masks and hand sanitizer, sticking within your social cohort, and restrictions on travel to name a few. These changes have also had a significant impact on not only how we live, but how we do business – particularly from a technological standpoint.
My personal technology revolution
In April 2020, TD Asset Management Inc. (TDAM) published an article titled Technology's Turn: How the technology sector is showing strength during uncertain times. The article highlighted four specific areas which have shown themselves to be the drivers of outperformance for the technology sector: Working from home, E-Commerce, Leisure and Entertainment, and Infrastructure. While the article is now over a year old, it has matured quite well with many of the key themes still playing out today. After reading the article again and reflecting on my own personal situation, I concluded that I have had my own "technology revolution" over the past year.
I remember when I would get on a plane and fly across the country for work. Now I simply log-in to WebEx or Teams, from home, and I am instantly connected face-to-face with clients and colleagues with the ability to share content at the click of a mouse. This is not only a cost-effective way to do business, it's also an efficient use of time without the need for planes, trains and automobiles.
I also never truly appreciated the convenience of E-Commerce companies, like Amazon, until the COVID-19 Pandemic, but now I can't imagine making the 100 km trip from Canmore to Calgary and driving around the city seeking an item that I wish to purchase. Now I simply reach for my smartphone, search online, click to make a purchase, and more-often-than-not, it's delivered to my front door within 48 hours.
Entertainment has also drastically changed. With movie theatres closed, more people, including myself reached for online movie networks and gaming sites to satisfy their leisure and entertainment needs. This increased demand for streaming content has had a positive impact not only on the companies providing the content, but also on the companies providing the infrastructure to deliver the content to the consumer.
The solution for the technology revolution at TDAM
Two years ago, TDAM created a solution that has participated in this technology revolution and this month will mark the second anniversary of the launch of the TD Global Technology Leaders Index ETF (TEC). TEC is a pure-play global technology sector ETF that provides exposure to many household names such as Facebook, Amazon, Netflix, Google, Apple and Microsoft. It also provides exposure to emerging technology themes and innovation in sectors such as Artificial Intelligence, Virtual Reality, Blockchain, Cloud Computing, E-Commerce, Social Media, Cybersecurity, and Fintech among others.
Since inception, TEC has outperformed the S&P500 by 38% and the Nasdaq 100 by 10%1. At 0.35% management fee, TEC provides incredible value for access to the technology sector relative to other options available in the marketplace and in just under two years it has become the largest technology sector ETF in Canada2.
Is there also a healthcare revolution in the making?
The revolution doesn’t stop with the Technology sector. We feel there is a similar phenomenon unfolding in the Healthcare sector. Last month TDAM published an article titled Building a Healthy Portfolio: Gaining exposure to the Healthcare sector can help boost a portfolio's returns and reduce volatility. The article highlighted two main drivers of outperformance for the healthcare sector: a growing and aging global population (demographics) and a continuous stream of innovation.
From an investment performance standpoint, innovation has been the bigger driver of outperformance for the Healthcare sector. We have seen some of this innovation at work over the past 12 months with the development of various COVID-19 vaccines including a new approach to vaccines - messenger ribonucleic acid (mRNA). The mRNA vaccines teach our bodies how to create a protein that triggers an immune response, which in turn creates antibodies that protect us from the virus.
The trend towards virtual healthcare appointments is also on the rise. Over the past 12 months, many of us have had virtual healthcare appointments with our family doctor or with a virtual healthcare provider. This new way of connecting with industry professionals for healthcare consultation brings together innovations in the technology and healthcare sectors that will change the way we seek medical advice for years to come.
Against this backdrop, last month TDAM launched the TD Global Healthcare Leaders Index ETF (TDOC), a low cost ETF providing exposure to the global healthcare sector and utilizing a 2% cap for companies in the portfolio. This cap reduces exposure to the slower growth Mega-cap companies (i.e. large pharmaceutical and biotech companies), while increasing exposure to companies with higher growth potential. Investing in global companies instead of only U.S. companies provides additional diversification and exposure to innovative companies around the world.
This is just the beginning
I believe that we are in-the-midst of a technology and healthcare revolution, and that the advances and innovation that we have seen over the past 12 months are only the beginning of greater things to come. Both sectors offer hope for humanity and will change the way we live our lives for years to come. They also offer a compelling investment opportunity for your portfolio.
For more information, visit us at www.td.com/etfs
Greg Croezen
Vice-President, ETF Distribution, TD Asset Management
1 TD Global Technology Leaders Index ETF |
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2 Based on current assets under management at the time of publishing. Source: Bloomberg Finance L.P. Data as of April 30, 2021.
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