ETFs: Cybersecurity has gone from ‘niche to necessity’ amid labor issues, expert explains

BlackRock Head of U.S. Megatrends and International ETFs Jeff Spiegel joins Yahoo Finance Live to explain why he's bullish on cybersecurity and robotics funds bucking current tech trends.

Video transcript

SEANA SMITH: Many investors ready to wave goodbye to 2022. The NASDAQ and S&P both down double digits so far this year. Tech has been hit especially hard, this sector off over 20% so far this year. Our next guest, though, has a fresh take on some of the plays within tech that could buck the downward trend that we have seen within the sector. For that, we want to bring in Jeff Spiegel, BlackRock head of US Megatrends and International ETFs. And this week's ETF report brought to you by Invesco QQQ.

Jeff, it's great to have you. iShares by BlackRock out with a new report here, a couple of thematic outlook, rethinking growth, helping investors navigate 2023. Technology, you're seeing some investment opportunity. I think everyone wants to know where.

JEFF SPIEGEL: Pleasure to be back with you. Thanks so much for having me again. We see seismic opportunity, and not just in technology. We're really thinking about growth writ large. So, effectively, over the course of 2020 through 2022, while those years might seem pretty different, they had one thing in common, which was equities were moving in lockstep, particularly in growth and particularly in technology.

So 2020 and 2021, it seemed like everything was going up together. 2022, it seemed like everything was going down together. That higher correlation was about 20% higher than norms. We think that that's going to change and move back to historical norms, going into next year. What that means for investors is, they have to be pickier, right? There are major opportunities in growth, but you can't just buy the whole market anymore.

And there's three main areas that we're excited about at a high level. The first is, we know one place a lot of money is going to be spent over the coming next few years. And that's by the government, specifically in clean energy and electric vehicles and in infrastructure. We have commitments in the US. We have commitments around the world.

The second is innovation in healthcare. That's genomics. That's immunology. That's neuroscience. These are spaces that have been incredibly beaten down and rerated over the course of this year. But there's a lot of phase II, phase III drugs, that are going to be coming to market over the next year that can be transformative.

And last, what we're thinking of as tech staples, or non-cyclical technology, specifically robotics in combating wage inflation and labor shortages, enabling reshoring and offshoring, and cybersecurity, which, in many ways, has moved from niche to necessity. It's not something that can be cut anymore during a downturn.

DAVE BRIGGS: All right, so let's drill down a little bit and try to get specific on some of that government money, in particular, the Inflation Reduction Act, which is a poor name, the climate bill. How can you invest on the money that will be spent over the next 10 years there?

JEFF SPIEGEL: So a few different areas really come to mind here. Clean energy and electric vehicles are really the key. So when we think about the Inflation Reduction Act, it targets about $370 billion of spending in these spaces. What we have to remember, though, is that $370 billion is effectively an estimate, right? So that's a mix of loans, grants, tax credits, and the uptake from companies is going to be a driver.

When you think about what else is going on, the Infrastructure Investment and Jobs Act massively expanding charging infrastructure for electric vehicles, the IRA itself reinstating incentives for consumers to purchase electric vehicles. We see near-term demand increasing. And that's going to lead suppliers to take up more of these loans and credits and opportunities from the government.

Actually, we estimate that that $370 billion number, already pretty seismic, could actually get as high as $800 billion. The two ETFs that we see as major opportunities in this space are the iShares clean energy ETF, ticker ICLN, iClean, and the iShares self-driving electric vehicle ETF, ticker, IDRV. And the interest in those ETFs has spiked dramatically since the passage of the IRA.

DAVE BRIGGS: All right, Jeff Spiegel, good stuff. Got to leave it there. Appreciate you being on.