My top stock market sector for 2024 (and beyond) is…

Often, the first port of call in investing is identifying a potentially lucrative sector before narrowing down to a favoured stock. So for this compilation post, we asked some of our contract writers to highlight the area within the stock market that they’re most looking to for potential winners!

AI

By Charlie Keough. The last few years haven’t been great for us retail investors. However, like the optimist I am, I’m looking ahead to 2024 (and beyond). And I think it could be the year where the artificial intelligence (AI) sector booms. 

The AI space is forecasted to grow exponentially between now and the end of the decade. We only have to look at the craze caused by the emergence of ChatGPT to see its potential.  

However, despite its lofty growth potential, arguably the AI revolution is already underway.  

We’ve seen evidence of this in the stock market during 2023, with shares in computer hardware and software manufacturer and designer Nvidia jumping an incredible 228%.  

And more widely, it’s not just the prospects of pure-play AI companies that excite me. Established tech players have begun to dip their toes into the space too. 

In recent times, there’s been a major push from Apple, which announced it was working on AI tools to challenge OpenAI’s services, including what some are calling its own ‘Apple GPT’. 

Other major players include Alphabet, Microsoft, and Tesla, to name a few. 

In 2024 and the years ahead, as billions worth of investment is pumped into the emerging sector, I think a host of opportunities across a variety of businesses will surface.  

I already have exposure to the space via Apple and Nvidia. But I’ll certainly be looking to add to these in the future.  

Charlie Keough owns shares in Apple and Nvidia.  

The financial sector

By Alan Oscroft. I see a few FTSE sectors that I think should have a good 2024 in the stock market, and many years beyond that. But my number one choice has to be the financial sector.

I mean banks and insurance stocks, mainly. I see a number of each on low valuations, with well-covered dividend forecasts.

City analysts have finance stocks down as some of the big cash stars this year. In fact, forecasts suggest that financials could make up half of the total FTSE 100 pre-tax profit gains in 2023.

If they’re right, and good results start trickling out in early 2024, we might see a springboard for future gains.

Banks and insurance firms feature in the list of biggest dividend rises, too, with HSBC Holdings at the top of the list.

And we also see Legal and General among the top 10 for dividend yields, with a forecast of 8.7%. Aviva is there too, on 8.0%. Both would be well covered by earnings.

Price-to-earnings (P/E) ratios are low, with Aviva at 7.5 and Legal and General on 8.6. Among the banks, Lloyds Banking Group is on a multiple of 6.2, while Barclays‘ is just 5.1.

Alan Oscroft has positions in Aviva and Lloyds Banking Group.

Gold

By Andrew Mackie. During the last 50 years we have witnessed only two gold cycles, both lasting a decade. The first one was in the 1970s, a decade mired in stagflation. The second was in the 2000s, during the tech bust and subsequent commodities bull market. I believe we are the cusp of entering a new gold cycle.

Historically, gold competes with US treasuries in portfolio allocations. Today, however, bitcoin and similar digital assets have stolen gold’s thunder, too.

I remain to be convinced that bitcoin is nothing other than a speculative asset. In 2022, as central banks began raising interest rates, bitcoin was no safe haven. On the other hand, gold held its own as the only truly scarce monetary asset. That leaves us with the Treasury market.

Last year, we witnessed one of the worst performances ever for the traditional 60:40 stock and bond portfolio. I am of the view that if treasuries continue to underperform, large capital allocators (such as pension and endowment funds) will begin to shift capital into gold.

As the proportion of public debt to gross domestic product (GDP) grows ever larger in western economies, their central banks will come under pressure to hold high quality assets in order to back those reserves. Over the last few years, global central banks have increased their holdings of gold as a percentage of their foreign reserves.

Today, I am of the firm believe that we are entering a new macro regime. Terrified of another damaging inflationary surge, central banks are not going to slash interest rates to 0%. If they are forced to, it will be because something has truly broken. In either scenario, I expect gold prices to definitely break out from $2,000 in the years ahead.

The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of investment advice. Bitcoin and other cryptocurrencies are highly speculative and volatile assets, which carry several risks, including the total loss of any monies invested. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Real estate

By Zaven Boyrazian. The real estate sector has been battered in the face of interest rate hikes to combat inflation. In fact, looking at the FTSE 350 Real Estate index, property stocks — on average — are at their lowest point since 2013!

Higher mortgage rates affect both families and corporate landlords. And while this downward pressure may be justified in some areas, the mass spread exodus of investors from the sector has created lucrative opportunities.

Plenty of non-office commercial real estate businesses, like Safestore and Londonmetric Property, are still delivering cash flow expansion. This, in turn, has paved the way for dividend hikes. And when paired with depressed valuations, dividend yields have gone through the roof. As a result, plenty of real estate investment trusts (REITs) on the stock market offer payouts in excess of 6% that continue to grow!

Investor concern may be justified for firms riddled with floating-rate mortgages. After all, higher debt servicing costs mean less capital available to fund dividends.

However, many management teams have already begun hedging interest rate risk exposure. And with the latest inflation figures revealing better-than-expected cooling, interest rates look like they’re set to stabilise. This bodes well for property valuations and, in turn, real estate stocks as we move into 2024. At least, that’s what I think.

Zaven Boyrazian owns shares in Londonmetric Property.

Technology

By Edward Sheldon, CFA. The world today is in the midst of a tech revolution. Accordingly, I’ve selected technology as my top area in the stock market for 2024 and beyond.

Within the tech sector, there are a number of areas I’m excited about. One is cloud computing. Today, cloud technology is used by a wide range of organisations, from tiny start-ups to multinational enterprises. Yet, realistically, the cloud industry is still in its early stages. Some experts see the industry growing at nearly 20% per year between now and 2030.

Another is FinTech (financial technology). Right now, FinTech companies are disrupting the financial services industry at a rapid rate. From digital banks to payments firms, there are a range of innovative companies that are capturing market share from the traditional banks. It’s worth noting that experts forecast global FinTech revenues to grow six-fold between now and 2030.

Of course, there’s also artificial intelligence (AI), which has received a lot of attention this year thanks to the success of ChatGPT. In the years ahead, this technology is set to have a big impact on every industry. Some experts believe that AI could be bigger than the internet.

Now, I’ll point out that the technology sector can be volatile at times. This is a risk to consider. Given that the world is increasingly becoming more digital, however, I’m bullish on the sector.