Growth companies have historically proven hard to forecast, while leading the larger S&P 500 year to date and over the last three months.
Top Global Investment Options in 2024 bring you several interesting opportunities across the world.
Important Takeaways
- Lower prices for natural gas and crude oil have caused the energy sector, which led the market in 2022, to lag this year.
- Non-U.S. developed markets may be of interest to investors looking for stocks with lower values in comparison to U.S. stocks.
- In times of economic uncertainty, defensive equities like utilities, healthcare, and consumer staples usually provide steadiness.
- Due to decreasing Chinese demand and weak global production, copper is still volatile.
- Due to robust purchases by central banks outside of the United States, gold is outperforming the S&P 500.
- The S&P 500 is expected to rise as October draws to a close. Yardeni Research’s research indicates that the index’s average return in October since 1928 has been 0.52%.
Although investors have other worries, the impending U.S. presidential election is, as you might think, a major factor influencing market sentiment.
Here is how several asset managers and financial advisors see the future of ten well-known asset classes as the calendar turns to the last two months of 2024:
- Energy stocks
- Growth stocks
- International stocks
- Emerging-market stocks
- Defensive stocks
- Dividend stocks
- Commodities
- Gold
- 10-year Treasurys
- Cryptocurrencies
Energy Stocks
Top Global Investment Options in 2024 include Energy Stocks as the first major opportunity. As of October 25, despite posting a 7.95% gain, the energy sector is the S&P 500’s worst-performing sector of the year. Moreover, small-cap energy equities are trailing other industries.
Crude oil and natural gas are down from their highs earlier in the year, according to Ayako Yoshioka, a director of portfolio consulting and chartered financial analyst at Wealth Enhancement Group in Los Angeles.
“Within the oil majors and refiners, geopolitical risk in the Mideast and China’s muted demand for oil remains at the forefront, with a focus on the timing and path of oil demand recovery following economic stimulus announcements in China,” adds Yoshioka.
“On the natural gas side of things, investor focus is on the potential oversupply of natural gas over the coming years as new capacity comes online,” she continues.
Growth Stocks
Overall, growth stocks have outperformed the S&P 500 in the last three months and the year to date. Stocks having the potential for rapid earnings growth fall under the growth category. Because of this, technology equities, together with consumer discretionary and health care stocks, make up a significant amount of growth indices.
The senior portfolio manager at Exencial Wealth Advisors in Charlotte, North Carolina, Jon Burkett-St. Laurent, states that “U.S. large-cap growth stocks as a group are highly profitable, with remarkably elevated yet steady growth.”
But traditionally, growth has been difficult to forecast, he says. “If the market is overestimating the chances that growth remains high and stable for years to come, then there may be significant valuation risk embedded in this group of stocks,” according to him.
International Stocks
Top Global Investment Options in 2024 includes international stocks to hold. Foamy valuations are not an issue for international stocks as an asset class. According to Krishna Mohanraj, CFA and portfolio manager at Diamond Hill Capital Management in Columbus, Ohio, this implies that a number of developed non-US markets can present attractive investment opportunities.
He said stock pickers might now think about looking to Europe, for instance. “There are many fundamentally strong businesses whose stocks are trading at attractive valuations, especially when compared with valuations of similar companies in the U.S. or other regions,” Mohanraj asserts. “Some of these European companies are not reliant on robust economic growth in their local markets, making them appealing even in uncertain economic conditions.”
He goes on to say that a growing emphasis on increasing shareholder returns makes stocks in Japan, another developed economy, appealing.
Emerging-market stocks
Well, Emerging Market Stocks are also Top Global Investment Options in 2024. According to Mohanraj, the Indian market is one of the few major economies that is expanding rapidly and has a thriving business environment that is attracting interest from around the world.
India is one of the biggest markets in the “emerging” category, along with China, Brazil, South Korea, and Mexico
According to Burkett-St. Laurent, the phrase “emerging market” may need to be updated in the long run.
“China is often lumped into this basket but is a developed market in many ways,” according to him. “Others in the bucket are China’s key trade partners and react mainly to economic developments there, further complicating the issue.”
He goes on to say that investors might find it wise to have some exposure to markets outside of North America, Europe, and Japan. “But this could be an area where active portfolio management is a better option than passive market exposure,” according to him.
Defensive stocks
Consumer staples, healthcare, and utilities are typically seen as defensive industries since they consistently produce income even during lean economic times.
The utilities sector has led the S&P for the last three months and for the entire year.
“Valuations of many defensive sectors have risen sharply over the last few years due to high uncertainty with respect to economic growth, the upcoming U.S. presidential election and geopolitical turmoil,” according to Burkett-St. Laurent. Although he points out that investors can be overpaying for this apparent safety, he adds that cash flow stability and tolerance to macroeconomic instability are crucial traits.
Dividend stocks
Dividend Stocks are an all time favorite. Thus, we include it in Top Global Investment Options in 2024. When it comes to dividends, defensive industries are frequently among the most dependable. The Utilities Select Sector SPDR Fund (ticker: XLU), for instance, offers a 2.7% yield. A 2.6% yield is offered by the Consumer Staples Select Sector SPDR Fund (XLP).
Dividends have contributed significantly to portfolio growth, accounting for roughly 32% of total S&P returns since 1926, according to S&P Global analysis from 2023.
The Vanguard Dividend Appreciation ETF (VIG), which has a 1.7% yield and a 17.1% year-to-date gain as of October 25, is a well-liked ETF for dividend investment. However, that is underperforming the S&P 500 as a whole.
According to Burkett-St. Laurent, his company does not distribute funds to customer accounts based on dividend yield. He points out that studies have shown dividend-focused investing to be frequently tax-inefficient and a poor indicator of value.
“Others have pointed out that dividend-paying stocks are often mature or even shrinking companies in the old economy with no opportunity to reinvest capital at favorable rates of return,” according to him. “We believe in allocating to equities with the best risk/reward profile with an aim to capture total returns, and we are agnostic as to whether those returns come via bond coupons, company dividends or capital gains,” adds Burkett-St. Laurent.
Commodities
Commodities are a popular choice for investors seeking portfolio diversification outside of stocks and bonds. Oil, natural gas, gold, silver, corn, soybeans, wheat, and lumber are among the commodities that are available for investment.
Will Rhind, the creator and CEO of GraniteShares ETFs, argues that China’s economic policies and global economic changes have sent conflicting signals to the commodities market in 2024. The GraniteShares Bloomberg Commodity Broad Strategy No K-1 ETF (COMB) is one of the company’s funds.
“China’s recent stimulus package has sparked hopes for a rally, leading to immediate price increases in key metals like iron ore, copper, nickel and aluminum,” adds Rhind.
But, he continues, copper is still unstable due to pressure from declining demand, especially from China, and sluggish global manufacturing.
“Silver, rallying alongside gold, shows strong momentum due to its industrial uses and expectations of falling interest rates, though it faces some short-term resistance,” adds Rhind.
Rhind argues that even with the drop in crude oil prices, the commodities market in 2024 is still unpredictable since it is influenced by demand fluctuations, geopolitical events, and economic changes.
Gold
Top Global Investment Options in 2024 includes gold. Gold, which many investors consider a safe haven in the face of widespread market instability, has been rising as a result of the causes Rhind mentions.
With a return of 32.5% as of October 25, the SPDR Gold Shares ETF (GLD), which tracks the price of gold bullion, has so far in 2024 outpaced the S&P 500 by a significant margin.
According to Burkett-St. Laurent, “gold is a speculative asset because it does not generate income.” It does, however, have a track record of offering some advantages for diversifying a portfolio. It tends to retain purchasing power over extended periods of time, while not being a direct inflation hedge.
He claims that non-US central banks, particularly China’s, have recently significantly expanded their gold purchases. This has caused spot prices to rise above what investors may typically anticipate in a situation when real rates are rising and the dollar is strong.
“Should China reduce or halt its purchases, then there could be some downside risk given this discrepancy,” he states.
10-year Treasurys
A key component of portfolio diversification is fixed income. Because they provide comparatively stable yields in times of market turbulence, investors frequently look to 10-year Treasurys in particular for safety and income.
According to Michael Tagliaferro, a CFA and the head of the retail and subadvisor team at PGIM Fixed Income, located in Newark, New Jersey, “given the super-low yields we experienced during much of the last decade, 10-year Treasury yields around 4% seem reasonably attractive for investors looking for a relatively safe year.”
He claims that even while the market as a whole believes that interest rates will eventually decline, there is some risk associated with the U.S. presidential election since some of the candidates’ ideas, such tariffs, may cause inflation.
Interest rates may increase as a result.
“In this instance, investors who owned a more diversified, actively managed portfolio of bonds with shorter maturities than a 10-year Treasury would likely fare better,” Tagliaferro claims.
He adds that bonds have historically been good shock absorbers for portfolios in the event that stocks have a significant correction while the Fed is reducing or halting rate reduction.
All things considered, long-term rates seem to have peaked and are on the decline. In the short term, rates might be rising as fears about robust economic growth and post-election fiscal stimulus increase, according to Tagliaferro.
Cryptocurrencies
Bitcoin’s price is now trading just below its year-to-date high of $73,096.85, which was hit in March, but it is still way above 2023 lows.
The iShares Bitcoin Trust ETF (IBIT), which expanded surprisingly quickly and currently has assets of $26.2 billion, is one of several spot Bitcoin ETFs that were introduced this year for investors who do not wish to directly own digital coins.
Conclusion
As we navigate the complexities of the global economy and financial markets in 2024, investors face a diverse landscape of opportunities and challenges. While growth stocks have led the market, their future trajectory remains uncertain. International and emerging markets, particularly India, offer potential for growth. Defensive sectors like utilities, healthcare, and consumer staples provide stability in uncertain times. Commodities, including gold, have seen mixed performances, influenced by factors like geopolitical tensions and economic shifts. Fixed income, particularly 10-year Treasurys, offers a relatively safe haven, but the impact of the U.S. presidential election and potential economic policies could influence their trajectory. Cryptocurrencies, though volatile, continue to attract investor interest, with the recent launch of spot Bitcoin ETFs providing new avenues for exposure. Ultimately, a well-diversified investment strategy, tailored to individual risk tolerance and financial goals, is crucial to navigating the dynamic and evolving investment landscape.
