​​3 Investment Ideas and Themes for 2024

While many analysts and investors believe that the risks of a recession in the United States are behind us due to the resilience it has showed so far, there is still a contrarian viewpoint suggesting that market participants might currently be underestimating the potential for an environment of higher interest rates persisting over an extended period, as famously articulated by Jerome Powell in his public address with the expression “higher for longer.”

And this scenario could significantly impact both U.S. and global economic growth at a time when American growth is already expected to slow down to “cool, with the median projection falling to 1.4 percent next year” according to the Fed. Even if growth has been resilient in 2023, it doesn’t mean that it cannot return into recession next year – after all, history has shown us that growth’s trajectory is rather unpredictable.

Moreover, despite a considerable reduction in inflation compared to the peak levels witnessed in 2022, it remains notably higher than the 2% inflation target, set by the majority of central banks in most developed economies, in the United States as well as in other parts of the world.

It’s important to consider that the process of inflation returning to “acceptable levels” typically unfolds over several years following a period of heightened inflation, mostly because of the extended and sustained high prices of products or services offered by companies and the persistent wage/price spiral.

Looking beyond the realms of inflation and monetary policy and their impact on the trajectory of global economic growth, several other risk factors should be considered, as they could have an impact on geopolitical stability and trade dynamics.

Ongoing conflicts, such as the war in Ukraine and the Israeli-Palestinian conflict, as well as the outcomes of key elections should be monitored as they can have an impact on the economic environment.

According to a report from Brunswickgroup, “countries making up over 50% of global GDP will undergo decisive elections” next year, including Taiwan, Indonesia, Russia, India, South Africa, United Kingdom, European Union, and the United States.

The dynamics after these elections and the evolution of macroeconomic disparities among global powers, particularly the United States, Europe, and China, are likely to pave the way for compelling investment opportunities, driven by both cyclical shifts and structural transformations within these regions.

Here are a few investment ideas you might consider for 2024.

Gold

In 2024, gold could find substantial support from various factors, such as ongoing trade tensions, armed geopolitical conflicts, a potential deceleration in China’s economic growth, lower-than-expected global economic expansion, outcomes from pivotal elections in major economies, and the prospect of interest rates remaining higher for an extended period beyond initial expectations.

Investors, seeking refuge in safe-haven assets during times of heightened uncertainty, may turn to gold as a reliable store of value and a hedge against the perceived risks associated with these geopolitical and economic uncertainties.

Additionally, the anticipated three rate cuts from the Federal Reserve in 2024, as predicted by the markets, are poised to exert continued downward pressure on the US dollar (USD) and Treasury yields, which usually support the price of Gold.

As the price of gold is denominated in American dollars, a weaker USD typically leads to an increase in the value of Gold, as a declining dollar makes Gold relatively more attractive and cheaper for investors in other currencies, contributing to higher demand.

Lower Treasury yields resulting from anticipated rate cuts usually make non-interest-bearing assets like Gold more appealing. When yields on investments, such as bonds decrease, then Gold becomes relatively more competitive in terms of potential returns.

It will be important for investors to closely follow the reasons why the Fed might decide to cut interest rates, as cutting interest rates because the American growth is strong enough, the employment situation is resilient and the inflation is heading down has different implications than cutting rates because of a recession.

Another factor that could support the price of Gold in 2024 is the sustained demand for Gold from global central banks. 2024 could possibly witness a continuation of the substantial purchases central banks made over the last couple of years. Gold is indeed a part of central bank reserves as it is a safe, liquid, and independent commodity. It is particularly popular for those aiming to reduce their reliance on the U.S. dollar.

According to the Gold Demand Trends Q3 2023 report from the World Gold Council, “central banks collectively bought 337t in Q3, the second highest third quarter on record” after a “record-breaking first half of the year”.

Bonds

Even as monetary policy might be about to be more accommodative around the globe thanks to lower inflation, fixed income still remains an attractive asset class in 2024, according to Morningstar Investment Management, especially sovereign debt which tends to perform better in times of slower economic growth and geopolitical risk.

As interest rates decline, investors with long-term positions will continue to receive high coupons, and bondholders could benefit from an additional increase in the price of their bonds. This is due to the inverse relationship between bond prices and interest rates, and the fact that newly issued bonds will have lower coupons, supporting demand for older bonds with higher rates.

Artificial Intelligence (AI)

The surge in investor enthusiasm for artificial intelligence (AI) initiatives spearheaded by major American corporations has been key to the notable rise of their stock prices in recent months (which have also pushed American indices to record impressive gains in such a short period of time and hit new records).

This burgeoning sector holds the potential for compelling investment opportunities. To capitalize on these promising prospects, you can focus on prominent American technology giants, often referred to as the “Magnificent Seven” (Apple, Alphabet, Amazon, Meta, Microsoft, Nvidia, and Tesla). However, these industry leaders come with a relatively high price tag. Consequently, you might want to explore opportunities among smaller companies.

Beyond the borders of the United States, you might also find interesting opportunities in the tech sector, particularly in China. Moreover, expanding the scope of your research beyond tech-focused companies and exploring diverse applications of AI proves worthwhile, as sectors such as cybersecurity and healthcare are witnessing substantial activity in the development and deployment of intelligent technologies.

Despite a market size that is expected to reach USD 2,760.3 billion by 2032 according to a report from Spherical Insights & Consulting, the worldwide artificial intelligence market is likely to be targeted by different regulation bodies, which can pose risks to the development of some projects.

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