Mid-Year Market GPS: Is Cloud Computing the Next Frontier for U.S. Equities?

Which themes are shaping the 2019 investment landscape? Read our investment teams’ thinking in the Janus Henderson Mid-Year Market GPS.

Portfolio Manager Jeremiah Buckley explains why cloud-based technology is a growing trend that is poised for continued expansion.

Key Takeaways

  • In addition to providing an update on how core investment themes have evolved since the start of the year, our Mid-Year Market GPS also identifies emerging trends investors should watch for in the months ahead.
  • Cloud technology is one of the fast-approaching themes that we believe could rise in importance for investors in the second half of 2019 and beyond.
  • As a core component of the cloud computing environment, Software as a Service (SaaS) has the potential to spark disruption across many different industries.

Cloud computing, or cloud-based technology, refers to the storing and accessibility of data and programs over the Internet, as opposed to a computer’s physical hard drive. The transition to cloud technology is a very economical move for enterprise applications such as billing and payment systems because it improves cost efficiencies and can help bolster security.

Only a fraction of total enterprise spending is currently allocated to the cloud, so we believe there is genuine potential in this space – not just for those companies providing cloud services, but also those firms behind the infrastructure and equipment that are helping to facilitate the growth of the cloud.

The Transition to the Cloud: Long Runway of Growth Ahead

Cloud computing as % of total enterprise IT spends in the U.S.

GDP Annual Growth Rates Chart | Thoughts & Bonds | Janus Henderson

Source: Gartner, as of 4/30/19. Notes: IT spend excludes telcom and IT services. *Estimated

Software as a Service (SaaS) is a related area where we see continued expansion of the market for companies that are offering these services. A core component of the overall cloud environment, SaaS is a software distribution model in which applications are hosted in the cloud and provided to users on a subscription basis. Some well-known examples include Google Apps, Dropbox, DocuSign and Slack. By upending the traditional model of “on-premises” services – where applications are installed and maintained on a company’s hard drives – SaaS has the potential to spark disruption across many different industries.

Cloud computing is just one example of the many interesting stories we believe are unfolding within U.S. equities. U.S. companies that are in a position to benefit from fast-approaching trends such as cloud computing could represent opportunities for investors who remain watchful as these themes take hold.

Investment Themes that Matter – Market GPS Discussion

Janus Henderson experts Alex Crooke (equities), Michael Ho (multi asset/alternatives) and Jim Cielinski (fixed income) explore the key themes for the second half of 2019. Aligning with the Janus Henderson Mid-Year Market GPS outlooks, the discussion will assess potential impacts and opportunities for investors in the months ahead.
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