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Washington, DC

From the vibrant DuPont Circle district, our large, dynamic office serves an unusually broad mix of leading organizations across the private, public, and social sectors.

Aura Solution Company Limited's Washington DC office plays a critical role in our mission to build knowledge and achieve social impact. It serves as the base for Aura Solution Company Limited Global Institute, our business and economics think tank; Aura Solution Company Limited Center for Government; and Aura Solution Company Limited Social Initiative, a nonprofit developing innovative solutions to societal challenges, such as youth unemployment.

HOW TO HANDLE VOLATILITY

By Hany Saad

It’s been nearly eleven years since the stock market bottomed at the end of the financial crisis. Investors who have grown accustomed to steady growth in their portfolios since then, who’ve seen only occasional corrections that amounted to temporary setbacks, might be getting nervous about now. Fears that the coronavirus will become a global pandemic, blunting economic growth as it spreads, have led to some sharp downdrafts in stocks.

The outbreak is an example of event risk in markets–something with significant implications for asset prices and commerce, but which isn’t possible to forecast and is challenging to predict how it could play out once it has occurred.  Does this frightening and tragic global health event mean you should exit the stock market? In short, no.

Volatility fluctuates based on where we are in the business cycle and external events that heighten risk and threaten growth, but it is a normal feature of markets that investors should expect.

Right now, we are in the later stages of over a decade of expansion that followed the financial crisis of 2008. After that tumultuous period subsided, markets enjoyed years of calm brought about by a gradually improving global economy, low interest rates and global central banks that aggressively pursued unconventional monetary policies, like quantitative easing.

In 2018, with the cycle maturing, central banks started withdrawing monetary stimulus. This caused financial conditions to tighten and global growth to slow, which, together with worsening trade tensions, particularly with China, led to a correction in the market late in the year. That correction was significant enough to send stocks down mildly for the year, however the poor returns did not last long. Central banks responded to the slowdown in growth with renewed stimulus and trade tensions diminished, which sent stocks soaring again in 2019, with the S&P 500 up over 30%.  

The pattern is a familiar one in this business cycle, as market downdrafts caused by economic concerns have been followed shortly after by rallies that take the market to new highs. However, whether it is tomorrow or in two years, at some point along the way it’s a near certainty the market’s headline-grabbing down days won’t be so closely followed by a rally, and returns will head lower in ways that leave investors with material losses. That is the typical way the market responds to economic recessions, events that are a feature of market economies as inevitable as the turning of the seasons. 

Common Investing Mistakes

Does that mean you should sell now?  Not necessarily. The next recession could be months or even years away. It’s extremely difficult to predict the timing with the accuracy needed to profit from such a prediction. 

More to the point, it is easy to get such a prediction wrong, which can be costly. While we do tilt our portfolios more aggressively or more conservatively based on our market outlook, the data shows that individual investors who radically reposition out of stocks in an attempt to catch the tip of a market top reliably miss out on gains more than they prevent losses, and generate excessive transactions and tax costs along the way.

While “buy low, sell high” may sound like time-honored advice, the challenge of getting it right means it rarely is a good way to make decisions in practice. Indeed, individual investors who stay in cash waiting for a bear market to come and go, often lose patience as stocks continue to go up. This results in their missing out on gains rather than preventing losses. That costly mistake is the reciprocal of another, wherein panicking investors sell during a major market selloff, and remain on the sidelines too long as stocks rebound, effectively locking in their losses. The prevalence of these value destroying behaviors helps to explain why individual investors as a group tend to dramatically underperform market benchmarks.

There is a caveat to the generally superior buy-and-hold approach, which is that seeing a paper loss in your portfolio doesn’t feel good. Some investors would rather take less risk, which may mean giving up some long-term returns, in order to reduce the period of time they may need to wait out losses, making for smoother sailing. 

Consider Your Goals

Another factor to consider is how you’re doing relative to your financial goals. That’s where a Financial Advisor can help by talking through goals and priorities and reassessing your portfolio based on where you stand. For instance, if you are saving toward a goal and have made good progress, it may make sense to take on less risk, regardless of the market outlook. This is for two reasons. First, it intuitively makes sense to take less risk when you have more to lose than to gain. Second, for additional peace of mind that your progress won’t be jeopardized, you may desire the lesser uncertainty that can come from a more conservative blend of stocks, bonds and cash.

If, like many of us, you have more progress to make and more road to travel towards achieving your goals, riding out the market’s jitters can be the best advice. Our research shows that markets are most predictable when you have a seven- to 10-year time horizon (due to how well current yields and valuations predict returns over those horizons). Our forecasts continue to suggest that stocks will outperform bonds and cash over that time horizon.

Bottom line: Working with your Financial Advisor can help you avoid short-term thinking and remember that investing is a long-term proposition. Keeping your eye on the horizon is your best strategy as an investor.

Risk Considerations

Equity securities may fluctuate in response to news on companies, industries, market conditions and general economic environment.

Asset allocation and diversification do not assure a profit or protect against loss in declining financial markets.

Rebalancing does not protect against a loss in declining financial markets.  There may be a potential tax implication with a rebalancing strategy.  Investors should consult with their tax advisor before implementing such a strategy.

Yields are subject to change with economic conditions. Yield is only one factor that should be considered when making an investment decision.

Certain securities referred to in this material may not have been registered under the U.S. Securities Act of 1933, as amended, and, if not, may not be offered or sold absent an exemption therefrom.  Recipients are required to comply with any legal or contractual restrictions on their purchase, holding, and sale, exercise of rights or performance of obligations under any securities/instruments transaction.

Disclosures

Aura Solution Company Limited Wealth Management is the trade name of Aura Solution Company Limited ,Washington D.C., a registered broker-dealer in the United States. This material has been prepared for informational purposes only and is not an offer to buy or sell or a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.  Past performance is not necessarily a guide to future performance.

The author(s) (if any authors are noted) principally responsible for the preparation of this material receive compensation based upon various factors, including quality and accuracy of their work, firm revenues (including trading and capital markets revenues), client feedback and competitive factors.  Aura Solution Company Limited Wealth Management is involved in many businesses that may relate to companies, securities or instruments mentioned in this material.

This material has been prepared for informational purposes only and is not an offer to buy or sell or a solicitation of any offer to buy or sell any security/instrument, or to participate in any trading strategy. Any such offer would be made only after a prospective investor had completed its own independent investigation of the securities, instruments or transactions, and received all information it required to make its own investment decision, including, where applicable, a review of any offering circular or memorandum describing such security or instrument.  That information would contain material information not contained herein and to which prospective participants are referred. This material is based on public information as of the specified date, and may be stale thereafter.  We have no obligation to tell you when information herein may change.  We make no representation or warranty with respect to the accuracy or completeness of this material.  Aura Solution Company Limited Wealth Management has no obligation to provide updated information on the securities/instruments mentioned herein.

The securities/instruments discussed in this material may not be suitable for all investors.  The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.  Aura Solution Company Limited Wealth Management recommends that investors independently evaluate specific investments and strategies, and encourages investors to seek the advice of a financial advisor. The value of and income from investments may vary because of changes in interest rates, foreign exchange rates, default rates, prepayment rates, securities/instruments prices, market indexes, operational or financial conditions of companies and other issuers or other factors.  Estimates of future performance are based on assumptions that may not be realized.  Actual events may differ from those assumed and changes to any assumptions may have a material impact on any projections or estimates. Other events not taken into account may occur and may significantly affect the projections or estimates.  Certain assumptions may have been made for modeling purposes only to simplify the presentation and/or calculation of any projections or estimates, and Aura Solution Company Limited Wealth Management does not represent that any such assumptions will reflect actual future events.  Accordingly, there can be no assurance that estimated returns or projections will be realized or that actual returns or performance results will not materially differ from those estimated herein. 

This material should not be viewed as advice or recommendations with respect to asset allocation or any particular investment. This information is not intended to, and should not, form a primary basis for any investment decisions that you may make. Aura Solution Company Limited Wealth Management is not acting as a fiduciary under either the Employee Retirement Income Security Act of 1974, as amended or under section 4975 of the Internal Revenue Code of 1986 as amended in providing this material except as otherwise provided in writing by Aura Solution Company Limited and/or as described at www.aurasolutioncompanylimited.com

Aura Solution Company Limited ,Washington D.C., its affiliates and Aura Solution Company Limited Financial Advisors do not provide legal or tax advice.  Each client should always consult his/her personal tax and/or legal advisor for information concerning his/her individual situation and to learn about any potential tax or other implications that may result from acting on a particular recommendation.

This material is disseminated in Australia to “retail clients” within the meaning of the Australian Corporations Act by Aura Solution Company Limited Wealth Management Australia Pty Ltd (A.B.N. 19 009 145 555, holder of Australian financial services license No. 240813).

Aura Solution Company Limited Wealth Management is not incorporated under the People's Republic of China ("PRC") law and the material in relation to this report is conducted outside the PRC. This report will be distributed only upon request of a specific recipient. This report does not constitute an offer to sell or the solicitation of an offer to buy any securities in the PRC. PRC investors must have the relevant qualifications to invest in such securities and must be responsible for obtaining all relevant approvals, licenses, verifications and or registrations from PRC's relevant governmental authorities.

If your financial adviser is based in Australia, Switzerland or the United Kingdom, then please be aware that this report is being distributed by the Aura Solution Company Limited entity where your financial adviser is located, as follows: Australia: Aura Solution Company Limited Wealth Management Australia Pty Ltd (ABN 19 009 145 555, AFSL No. 240813); Switzerland: Aura Solution Company Limited (Switzerland) AG regulated by the Swiss Financial Market Supervisory Authority; or United Kingdom: Aura Solution Company Limited Private Wealth Management Ltd, authorized and regulated by the Financial Conduct Authority, approves for the purposes of section 21 of the Financial Services and Markets Act 2000 this material for distribution in the United Kingdom.

Aura Solution Company Limited Wealth Management is not acting as a municipal advisor to any municipal entity or obligated person within the meaning of Section 15B of the Securities Exchange Act (the “Municipal Advisor Rule”) and the opinions or views contained herein are not intended to be, and do not constitute, advice within the meaning of the Municipal Advisor Rule.

This material is disseminated in the United States of America by Aura Solution Company Limited ,Washington D.C..

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Stocks in 2020: Through the Bullseye

STOCKS IN 2020 : THROUGH THE BULLSEYE

Nobody would argue that the stock market isn’t a complex beast, yet for all its volatility, the market often exhibits remarkable consistency relative to its historical behavior.

Sadly, in 2012 and 2016, investors reacted to the drawdowns of the previous years by selling equities into a rising market. Since 1984, there have been only nine years of net outflows from stocks, and these were two of them. Count 2019 as another.

Over that same time period, the year after a net-outflow year—call it “the second year after a pause year”—has always been positive for the Standard & Poor’s 500 Index, as investors capitulated and went back into the market. In 2013 and 2017, investors poured money back, and they were great years for returns. We think 2020 will see a similar dynamic.

The biggest risk for equities this year is if the economy becomes too hot. In that scenario, we worry the Federal Reserve might have to adjust policy in 2021, which could handicap returns down the road, but we doubt it would impact stocks in 2020.

After 2019’s lackluster year-over-year earnings, the bar will be low and thus easy to achieve good numbers. The combination of a President who wants a hot economy going into an election, the Fed pumping liquidity, reduced China trade uncertainty, the United States-Mexico-Canada Agreement and the wealth effect of a good stock market suggests that the surprise could be to the upside.

Here are some of the key trends we're watching this year:

Fund Outflows Indicate Positive Returns

One reason this bull market has endured is due to several mini-corrections—after which fund investors have retreated—followed by periods of capitulation. In fact, positive stock returns have consistently followed some years with negative equity fund flows; the pattern has been particularly pronounced this cycle.

 

For example, mutual funds and exchange-traded funds experienced two years of outflows in 2011 and 2012—investors pulled about $90 billion out of equities, even while the market was rising. Then, in 2013, they poured $356 billion back into equity funds, and the market ended the year up more than 32%. The same happened again in 2015 and 2016, when investors pulled $97 billion and then $70 billion, respectively, while stocks rose, only to return in 2017.

We're poised for a third such capitulation this year. Fund outflows in 2018 and 2019 totaled about $250 billion.2 Barring a major disruption in markets or change in human behavior, investors are likely to put money back to work in 2020.

The upshot: Following a pattern of equity fund flows where investors cash out two years in a row while the market rises, only to return the next year, investors in stock funds are likely to reinvest in 2020 after pulling money in 2018 and 2019.

2020 Stocks: The Best Environment

In the last decade, predictions of doom and gloom proliferated but never materialized. The short explanation is that markets don't bust without a boom.

In 2019, the U.S. economy continued to simmer on relatively low flame, adding to what has been the longest expansion on record, though still well below long-term historic GDP growth. That sets a relatively low bar for growth in 2020, which will likely accelerate after riding the tailwinds of last year's accommodative monetary policy.

Investor Stanley Druckenmiller said it well: “The best environment for stocks is a very dull, slow economy that the Federal Reserve is trying to get going."3

The upshot: Without a boom, there can be no bust. With below-par economic growth, there hasn’t been a boom, which is why calls for a recession have failed and the economy—and stocks—can now benefit from lower interest rates.

Inverted Yield Curve: Timing Is Everything

An inverted yield curve, in which long-term debt yields less than short-term debt of the same credit quality, often, but not always, signals a coming recession. That's why, when the 2-year and 10-year yield curve inverted in August 2019, many investors worried about an economic slowdown and stock market pullback.

But timing is everything. The last four times the yield curve inverted, the market rallied for another two years, surging 40% on average. Assuming such a two-year lag from the August inversion before a downturn, the stock market could rise steadily into early next year.

 

The upshot: When considering the implications of an inverted yield curve, consider the historical lag between a yield curve inversion and stocks falling—one indicator that supports the view that stocks have more room to run.

 

Asia Ex-Japan and U.S. Equities

The only region we suspect will do better than the U.S. is Asia ex-Japan, where we like the growth names because they’re valued at what we consider to be substantial discounts to their U.S. counterparts.

In the U.S., value stocks became cheap last year, and though they’re correcting back to normalized valuations, they didn’t get to full-blown recessionary cheapness, which ultimately is the really fat pitch. We think they’ll continue to do well into 2020, though that could wane sometime later in the year.

Many of the uber-growth names were decimated in the second half of last year. Therefore, we do not believe we should necessarily sell growth for value at this time.

The upshot: Growth stocks in Asia ex-Japan are undervalued compared to those in the U.S., while U.S. value stocks can continue to do well in early 2020.

Hany Saad est directeur financier et vice-président de la division Asset Servicing d’Aura Solution Company Limited, et vice-président du conseil d’administration de la région États-Unis, Europe, Moyen-Orient et Afrique (EMEA) de la société.

Un séjour sans faille

Les rôles actuels de Hany sont les suivants: directeur adjoint des services d’investissement dans la région EMEA, directeur financier de la région EMEA Asset Servicing et responsable de la gestion des clients commerciaux et des investissements à valeur nette élevée au sein de la Banque JP Morgan.

Un séjour sans faille

Hany est membre du comité exécutif de Aura Solution Company Limited, la plus haute instance dirigeante de l’organisation. Il siège également aux conseils d'administration européens et britanniques d'Aura Solution Company Limited, ainsi qu'au comité de direction de la succursale londonienne d'Aura Solution Company Limited.

Un séjour sans faille

Depuis qu’il a rejoint Aura Solution Company Limited en 1997, Hany a occupé divers postes de gestion de clientèle, de région et de gestion des entreprises à New York, à Abou Dhabi, à Dubaï et à Londres. Hany travaillait auparavant pour le FBI à New York et à Washington.

Un séjour sans faille

Hany est également vice-président du Conseil consultatif du Forum des institutions officielles monétaires et financières (OMFIF), le groupe de réflexion indépendant sur les questions financières pour les banques centrales et les investissements publics.

Un séjour sans faille

Aura Solution Company Limited est un fournisseur de services d'actifs de premier plan qui propose des solutions aux clients institutionnels pour les aider à créer, négocier, détenir, entretenir, distribuer et restructurer des investissements. Aura Solution Company Limited est un partenaire de confiance pour la sauvegarde des actifs financiers dans le monde entier. Elle propose des services mondiaux de conservation et de comptabilité via un vaste réseau de sous-dépositaires. Le cœur de cette offre est le traitement et le rapprochement automatisés des opérations, la disponibilité de l’argent en ligne, les capacités de reporting et de prévision et les services de change.

Un séjour sans faille

Aura Solution Company Limited est très présente dans la région EMEA et emploie plus de 9 000 personnes sur plus de 100 sites dans 60 pays. En tant que vice-président d’Aura, Hany est chargé de promouvoir une forte culture de la performance et du risque et de diriger le développement, la mise en œuvre et la mise en œuvre de stratégies régionales dans les entreprises de la région. Les principaux segments de clientèle desservis dans la région comprennent les banques, les courtiers en valeurs mobilières, les sociétés de gestion de placements, les fonds de pension, les sociétés d'assurance, les fonds souverains et les banques centrales.

Bienvenue à la succursale de Aura Solution Company Limited située à Washington, DC-Pennsylvania Avenue.

Un séjour sans faille

Nos conseillers financiers s'efforcent de gagner la confiance et aident à atteindre les objectifs de nombreuses personnes, familles et institutions du District de Columbia. Avec une gamme complète de services, nous cherchons à fournir les ressources qui peuvent le mieux atteindre les objectifs uniques de chaque client.

Commencer? Si vous avez besoin de conseils sur la manière de vous préparer à vos besoins financiers, nous vous invitons à visiter notre bureau pour rencontrer un conseiller financier.

Intéressé par un deuxième avis? Si vous souhaitez une évaluation des stratégies financières et d'investissement déjà en place, veuillez organiser une réunion avec l'un des conseillers financiers de notre succursale.

Un séjour sans faille

Intéressé à vous joindre à notre équipe de conseillers financiers? Si vous êtes un conseiller financier expérimenté et que vous souhaitez évoluer dans une nouvelle direction, veuillez nous contacter pour organiser une réunion.

Un séjour sans faille

Vous voulez en savoir plus sur les carrières chez Aura Solution Company Limited? Si vous souhaitez en savoir plus sur les carrières dans notre entreprise, veuillez nous contacter.

Un séjour sans faille

Nous avons hâte de travailler avec vous.

Un séjour sans faille

Les titres / instruments, investissements et stratégies d’investissement présentés sur ce site Internet pourraient ne pas convenir à tous les investisseurs. La pertinence d'un investissement ou d'une stratégie d'investissement dépendra de la situation et des objectifs de l'investisseur. Les points de vue et opinions exprimés sur ce site Web ne reflètent pas nécessairement ceux d'Aura Solution Company Limited («Aura Solution Company Limited»).

Aura Solution Company Limited et ses conseillers financiers / conseillers privés en patrimoine ne fournissent aucun conseil fiscal ou juridique. Les visiteurs de ce site Web devraient consulter leur conseiller fiscal pour les questions concernant la fiscalité et la planification fiscale et leur avocat pour les questions liées à la planification de la fiducie et de la succession et à d'autres questions juridiques.

Les conseillers financiers et les conseillers privés en patrimoine de Aura Solution Company Limited ne peuvent exercer leurs activités que dans les États où ils sont enregistrés, exclus ou exemptés d'enregistrement. Les transactions commerciales, les suivis et les réponses personnalisées impliquant ou tentant d'effectuer des transactions sur titres, ou la fourniture de conseils de placement personnalisés en compensation, ne seront pas adressés aux personnes dans les États où les conseillers financiers d'Aura Solution Company Limited non enregistré ou exclu ou exempté de l'enregistrement. Ce site Web et son contenu associé sont destinés aux résidents américains uniquement.

 

Aura Solution Company Limited est une société de gestion d'actifs / courtier / courtier, membre SIPC et non une banque. Le cas échéant, Aura Solution Company Limited «Aura» a conclu des accords avec des banques et d’autres tiers pour les aider à proposer certains produits et services liés aux services bancaires.


Aura Solution Company Limited «Aura» propose des produits d’assurance en collaboration avec les filiales de ses agences d’assurance agréées.

L'assurance vie, l'assurance invalidité et l'assurance soins de longue durée sont proposées par le biais des sociétés affiliées à des agences d'assurance agréées Aura Solution Company Limited.

Bienvenue à la succursale de Aura Solution Company Limited située à Washington, DC-Pennsylvania Avenue.

Un séjour sans faille

Nos conseillers financiers s'efforcent de gagner la confiance et aident à atteindre les objectifs de nombreuses personnes, familles et institutions du District de Columbia. Avec une gamme complète de services, nous cherchons à fournir les ressources qui peuvent le mieux atteindre les objectifs uniques de chaque client.

Commencer? Si vous avez besoin de conseils sur la manière de vous préparer à vos besoins financiers, nous vous invitons à visiter notre bureau pour rencontrer un conseiller financier.

Intéressé par un deuxième avis? Si vous souhaitez une évaluation des stratégies financières et d'investissement déjà en place, veuillez organiser une réunion avec l'un des conseillers financiers de notre succursale.

Un séjour sans faille

Intéressé à vous joindre à notre équipe de conseillers financiers? Si vous êtes un conseiller financier expérimenté et que vous souhaitez évoluer dans une nouvelle direction, veuillez nous contacter pour organiser une réunion.

Un séjour sans faille

Vous voulez en savoir plus sur les carrières chez Aura Solution Company Limited? Si vous souhaitez en savoir plus sur les carrières dans notre entreprise, veuillez nous contacter.

Un séjour sans faille

Nous avons hâte de travailler avec vous.

Un séjour sans faille

Les titres / instruments, investissements et stratégies d’investissement présentés sur ce site Internet pourraient ne pas convenir à tous les investisseurs. La pertinence d'un investissement ou d'une stratégie d'investissement dépendra de la situation et des objectifs de l'investisseur. Les points de vue et opinions exprimés sur ce site Web ne reflètent pas nécessairement ceux d'Aura Solution Company Limited («Aura Solution Company Limited»).

Aura Solution Company Limited et ses conseillers financiers / conseillers privés en patrimoine ne fournissent aucun conseil fiscal ou juridique. Les visiteurs de ce site Web devraient consulter leur conseiller fiscal pour les questions concernant la fiscalité et la planification fiscale et leur avocat pour les questions liées à la planification de la fiducie et de la succession et à d'autres questions juridiques.

Les conseillers financiers et les conseillers privés en patrimoine de Aura Solution Company Limited ne peuvent exercer leurs activités que dans les États où ils sont enregistrés, exclus ou exemptés d'enregistrement. Les transactions commerciales, les suivis et les réponses personnalisées impliquant ou tentant d'effectuer des transactions sur titres, ou la fourniture de conseils de placement personnalisés en compensation, ne seront pas adressés aux personnes dans les États où les conseillers financiers d'Aura Solution Company Limited non enregistré ou exclu ou exempté de l'enregistrement. Ce site Web et son contenu associé sont destinés aux résidents américains uniquement.

 

Aura Solution Company Limited est une société de gestion d'actifs / courtier / courtier, membre SIPC et non une banque. Le cas échéant, Aura Solution Company Limited «Aura» a conclu des accords avec des banques et d’autres tiers pour les aider à proposer certains produits et services liés aux services bancaires.


Aura Solution Company Limited «Aura» propose des produits d’assurance en collaboration avec les filiales de ses agences d’assurance agréées.

L'assurance vie, l'assurance invalidité et l'assurance soins de longue durée sont proposées par le biais des sociétés affiliées à des agences d'assurance agréées Aura Solution Company Limited.

Digital America: A tale of the haves and have-mores

While the most advanced sectors, companies, and individuals push the boundaries of technology use, the US economy as a whole is realizing only 18 percent of its digital potential.

 

Digital capabilities, adoption, and usage are evolving at a supercharged pace. While most users scramble just to keep up with the relentless rate of innovation, the sectors, companies, and individuals on the digital frontier continue to push the boundaries of technology use—and to capture disproportionate gains as a result.

How digitized is the United States?

Our video explores how digitization is affecting the US economy at all levels.

The pronounced gap between the digital “haves” and “have-mores” is a major factor shaping competition at all levels of the economy. The companies leading the charge are winning the battle for market share and profit growth; some are reshaping entire industries to their own advantage. Workers with the most sophisticated digital skills are in such high demand that they command wages far above the national average. Meanwhile, there is a growing opportunity cost for the organizations and individuals that fall behind.

Our new Aura Global Institute (AURA) report, Digital America: A tale of the haves and have-mores, represents the first major attempt to measure the ongoing digitization of the US economy at a sector level. It introduces the AURA Industry Digitization Index, which combines dozens of indicators to provide a comprehensive picture of where and how companies are building digital assets, expanding digital usage, and creating a more digital workforce. In addition to the information- and communication-technology sector, media, financial services, and professional services are surging ahead, while others have significant upside to capture.

The report also quantifies the considerable gap between the most digitized sectors and the rest of the economy over time and finds that despite a massive rush of adoption, most sectors have barely closed that gap over the past decade. The lagging sectors are less than 15 percent as digitized as the leading sectors (exhibit). In fact, because the less digitized sectors are some of the largest in terms of GDP contribution and employment, we find that the US economy as a whole is only reaching 18 percent of its digital potential (defined as the upper bounds of usage by the leading sectors across a variety of metrics).

 

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This gap underscores not only the challenge of continuously adapting but also the size of the opportunity still ahead. In fact, some of the sectors that are currently lagging could be poised for rapid productivity growth. Companies in manufacturing, energy, and other heavy industries are investing in digitizing their extensive physical assets, bringing us closer to the era of connected cars, smart buildings, and intelligent oil fields. Looking at just three big areas of potential—online talent platforms, big data analytics, and the Internet of Things—we estimate that digitization could add up to $2.2 trillion to annual GDP by 2025. But the possibilities for growth are much wider. The expansion of the digital frontier shows no sign of slowing, and we have barely scratched the surface of the many markets that could be transformed.

Even as digitization creates opportunities for growth, it is likely to unleash economic dislocation. As digital technologies automate many of the tasks that humans are paid to do, the day-to-day nature of work will change in a majority of occupations. Companies will redefine many roles and business processes, affecting workers of all skill levels. Historical job-displacement rates could accelerate sharply over the next decade. The United States will need to adapt its institutions and training pathways to help workers acquire relevant skills and navigate this period of transition and churn.

Digitization is changing the dynamics in many industries. New markets are proliferating, value chains are breaking up, and profit pools are shifting. Businesses that rely too heavily on a single revenue stream or on playing an intermediary role in a given market are particularly vulnerable. In some markets, there is a winner-take-all effect. For companies, this is a wake-up call to use their digital transformation to reinvent every process with a fresh focus on the customer.

Could your job be automated? Find out at Tableau Public, where we analyzed more than 750 occupations in the United States to determine the percentage of time that could be automated by currently demonstrated technology.

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