Investors always look forward for opportunities and look back to learn the lessons the market provides each year. 2023 was a tough year with most of the gains coming in the last quarter. 2023 closed with a 7.8% gain.
In 2024 the expectations are that Material and Health Stocks will lead the market. One could argue that natural resource companies play a bigger role in the world’s future than ever before, yet most investors have minimal exposure to these companies.
We have identified the best opportunities, as well as the risks we believe could torpedo performance over the next 12 months. We expect to see reduced government spending, potential global recession, worsening geopolitical tensions, and an upcoming US election. It is important to make sure you have a well-thought-out asset allocation which is designed to see you through the periods of volatility. If you are constantly chopping and changing, the plan can’t (and won’t) work.
The consensus is that central banks have managed to engineer a soft landing. However, the experts are not willing to discount the prospect of a bumpy 2024.
The main issues for investors to address this year.
- Equity valuations look unattractive relative to bonds.
With interest rates rising in 2023, returns from active investments are relatively closer to non-active investments. We expect that investors will look to be overweight to the fixed interest sector and hold less weighting in equities. The key risk for fixed interest investors is inflation remaining above target for longer which could trigger a new wave of Bond market volatility impacting long-term performance.
- The impact of interest rates and rising unemployment
As it becomes harder for people to find jobs, there is a flow-on effect on confidence and spending. This can be hard to pinpoint, but it has a knock-on effect on the economy.
- Private markets are an ever-growing opportunity set.
Liquidity in private markets has increased significantly as more investors target this space. This means companies no longer need to come to public markets for capital or liquidity. However, the sector tends to be overweight to Fixed Interest and Cash. With increased liquidity in this sector, we expect more investors will look to invest in alternative investments.
- Property Sector
The listed real estate securities market, both domestically and at a global level, will bounce back once interest rates stabilize and inflation has been tamed. Commercial property will have its challenges over the next couple of years. Better-quality assets, located in better positions will still provide strong cash flows – though we are unlikely to see large transaction volumes.
- Economy
Population growth and infrastructure spending are also providing a boost and will continue to underpin the growth of the economy. A soft landing rather than a recession seems the most likely outcome.
This year looks like it may provide opportunities for investors to achieve long term growth and high yields with reduced risk. With a soft landing expected and expectation that interest rates will start to pull back towards the end of year 2024 should provide opportunities for investors.
If you have any questions, please contact our office.
Grow Your Wealth Pty Ltd
AFSL 403509
51 Thuringowa Drive
Kirwan QLD 4817
Phone: (07) 4771 4577
Email: [email protected]
Jason Fittler: [email protected]
Jane Fittler: [email protected]
