As 2024 fast approaches, we have identified some key sectors that are well-positioned for success next year. After the ups and downs from this turbulent year in the stock market, investors are looking forward to a fresh start. Several key sectors show promise in delivering returns in the coming year, so let’s drive right in.
Energy: Powering Up for Success
The energy sector stands out as a clear leader for outperformance in 2024. The ongoing global energy crisis is causing oil and gas prices to surge, which in turn, favors energy companies. The shift towards clean energy sources presents new opportunities for those involved in renewable energy and energy storage. Below are several reasons to consider the energy sector for your portfolio in 2024:
- According to the International Energy Agency, global oil demand is projected to increase by 1.9 million barrels per day in 2024.
- Rystad Energy forecasts the average price of oil to be $90 per barrel in 2024.
- The S&P Energy Index has surged by an impressive 50% year-to-date in 2023, making it the leading performer in the S&P 500.
Healthcare: A Stable Climb
The healthcare sector is a tried and true, stable investment that is expected to continue to thrive in 2024. The aging population is driving an increased demand for healthcare services, while advancements in medical technologies offer new opportunities for healthcare companies. Below are a few key points supporting the healthcare sector's potential:
- Grand View Research predicts the global healthcare market to grow at a compound annual growth rate of 4.2% from 2023 to 2028.
- Statista estimates the US healthcare market to reach a staggering $4.4 trillion in 2023.
- The S&P 500 Health Care Index has shown resilience, returning 12% year-to-date in 2023.
Technology: The Digital Revolution
The technology sector has had a rough year in 2023 but there is reason for optimism in 2024. The increasing pace of digital transformation sees businesses heavily investing in technologies such as cloud computing, artificial intelligence, and machine learning. The sector's innovative and ever-changing nature positions it for substantial growth in the coming years. Key points supporting the technology sector include:
- MarketsandMarkets anticipates the global digital transformation market to grow at a CAGR of 16.3% from 2023 to 2028.
- Statista projects the US cloud computing market to reach $663.4 billion in 2023.
- The S&P 500 Technology Index has demonstrated resilience, returning 7% year-to-date in 2023.
Consumer Discretionary: Remaining Strong
In sync with a strong economy, the consumer discretionary sector is in a prime position to reap substantial benefits in 2024. As consumers have more disposable income, spending on discretionary items such as travel, entertainment, and dining is expected to rise. Below are several factors supporting the consumer discretionary sector:
- The National Retail Federation predicts a 2.5% growth in US consumer spending in 2024.
- The US Travel Association estimates the US travel and tourism industry to generate $1.9 trillion in economic activity in 2024.
- The S&P 500 Consumer Discretionary Index has outperformed, returning 15% year-to-date in 2023.
Industrials: Building on Economic Growth
The industrials sector is also expected to thrive in 2024, benefitting from a strong economy. Growing businesses typically invest in new equipment and facilities, and the sector is home to established companies well-positioned for sustained growth. Key points supporting the industrials sector include:
- The US Census Bureau projects a 4.5% growth in US capital goods orders in 2024.
- GlobalData estimates global construction spending to reach $12.7 trillion in 2024.
- The S&P 500 Industrials Index has performed admirably, returning 16% year-to-date in 2023.
While these sectors show promise in 2024, it's still important for investors to conduct thorough research before making any investment decisions. Diversifying portfolios across several key sectors remains a tried and true strategy to mitigate risks. As we step into 2024, staying informed and adaptable will be key to navigating the dynamic landscape of the financial markets.
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