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2024 predictions: What is the outlook for financial markets?

By Kate Leaman, chief market analyst at AvaTrade

Throughout 2023, a year characterised by inflation, the cost-of-living crisis and continuing geopolitical unrest, traders and consumers alike have felt the full effect of rising inflationary pressures.

As the year comes to a close, Wall Street is preparing for 2024 with a consensus that inflation will continue to fall. This will represent a continuation of the trend seen throughout 2023, with inflation reaching up to 10.1 per cent in January 2023 before gradually declining in the ensuing months.

Members of the Federal Reserve and other leading economists expect steady disinflation, with the rate likely to drop below to 3 per cent. The Federal Reserve forecasts that core inflation will fall to 2.6 per cent in 2024, down from 3.7per cent. However, a survey by the University of Michigan shows that consumer inflation expectations are rising. In fact, experts believe inflation will be moderate, resulting in easing interest rate pressures later in 2024.

What’s more, the stocks with strong growth potential, low debt levels, innovative products or services could outperform expectations. For example, the outlook for tech giants such as Apple, healthcare companies such as Pfizer, and consumer-focused companies like Amazon is favourable.

As inflationary and interest rate pressures are expected to ease, industries such as technology, financial services, real estate, gold, and the consumer discretionary sector are expected to perform well in 2024. Meanwhile, there is a lot of uncertainty surrounding some commodities markets, particularly when it comes to oil.

The promise of technology: the rise in digital transformation

AI (Artificial Intelligence) has experienced explosive growth in the last 12 months. This boom is anticipated to continue in the coming years, with the potential for substantial returns. Established tech giants like Apple, Nvidia, MSFT, Amazon, Google, and IBM are all exploring AI opportunities. The technology is not just being used in the tech space, as companies across a range of industries including financial services, healthcare, and procurement are using it.

The sector’s growth potential is driven by various applications, such as chatbots like ChatGPT, that have taken the world by storm. What’s more, the technology is also capable of mining vast quantities of data in an efficient manner – an extremely time-consuming task for people. This allows individuals to focus on using the data to ascertain how best to achieve growth for their organisation.

In addition to AI, clouding computing and FinTech are anticipated to thrive in the digital age. As cloud computing is predicted to continue growing exponentially and FinTech remains an ever-evolving landscape with trends such as the rise in online and mobile banking, the technology sector is poised for success. The stocks worth monitoring in 2024 include Nvidia, Meta Platforms, Amazon, Microsoft, Apple, Alphabet and Tesla. Though volatility remains a risk, the digital transformation in the technology sector is compelling.

The financial sector

Moreover, during a time of rising inflation and interest rates, the financial sector has proven itself to be resilient in 2023 and is therefore considered to be a promising sector in 2024. Characterised by low valuations, well-covered dividend forecasts, and expectations of strong profit gains, the sector is seen as being attractive to investors. In fact, analysts suggest that the financial sector could contribute significantly to the FTSE 100 pre-tax profit gains. The stocks that have the possibility for success in 2024 are West Fraser Timber Co, Morgan Stanley, JP Morgan, and Citigroup.

The potential of real estate

Despite challenges posed by increasing interest rates, which are currently at their highest rate in 15 years, the real estate sector offers various opportunities. For instance, non-office commercial real estate businesses, real estate investment trusts (REITs), and companies with cash flow expansion and dividend growth potential are appealing to investors. Ultimately, hedging against interest rate risk and stabilising interest rates may also benefit the sector.

The future of commodities  

Having experienced high levels of volatility throughout 2023, this unpredictability is expected to continue impacting the oil market in the coming year too.  While the International Energy Agency (IEA) expects a significant deceleration in demand for the commodity, on the other hand, OPEC, the organisation of oil-producing nations, is optimistic regarding the commodity’s outlook due to the robust growth primarily driven by China.

This highlights the ongoing discord between OPEC and the IEA on matters such as the long-term outlook for oil demand and the necessity for investments in new oil supplies. However, with the ongoing conflicts in the Middle East, this makes it even more challenging to predict the future of oil as we head into 2024.

Additionally, gold has proven to be a strong performer in 2023 in an unstable market – and this will only continue in 2024. Some experts believe that the gold sector is poised for considerable growth as a hedge against inflation and market instability.

Investors may turn to gold as an alternative to traditional assets like US treasuries and cryptocurrencies like Bitcoin and Ethereum. This view is reinforced by the increasing gold reserves of central banks and their concerns about inflation. Notable stocks for traders to keep an eye on in 2024 are Barrick Gold and Newmont.

Ultimately, as we approach 2024, there is optimism surrounding the financial markets, particularly the financial services, technology, real estate, and gold sectors. While market instability remains a possibility, it is important for investors and consumers to monitor these closely to not only make informed decisions on stock trading but also to increase prosperity prospectives.

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