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Five themes for investors to watch this year

Each year brings its own set of challenges and opportunities. Here's what I'll be keeping an eye on in 2024, though it won't necessarily change my investment strategy.
By · 19 Feb 2024
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19 Feb 2024 · 5 min read
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One of the exciting things about investing (and life in general) is that nothing stays the same for long. We see daily changes, as well as longer lasting shifts, in the world around us, many of which can be worth a closer look as investors. 

Here’s a quick overview of five themes to consider in 2024. 

1. Interest rates 

After several years of record low rates followed by two years of unrelenting rate hikes, interest rates are a hot topic. 

The latest ABS data shows inflation is heading south, and if this continues, we may see the official cash rate head lower. That’s certainly the expectation of several of our biggest banks. 

Why does this matter?  

Australians have been tucking cash away in savings accounts to take advantage of higher rates. If rates cool, more investors may turn to the share market in the hope of earning higher returns (though with increased risk). A lower rate environment is also likely to be good news for listed companies. 

Long story short, it could be time to think about how lower rates could impact your investment returns. This may include your super if you’ve focused on a capital stable strategy over the past few years.    

2. Decarbonisation 

2023 saw an unprecedented level of investment in ‘clean energy’ – around $US1,740 billion ($A2,660 billion) globally, as governments, companies and consumers rallied behind the push for renewables. 

The shift to green energy is not new, but decarbonisation is an ongoing structural change that investors cannot afford to ignore.  

It’s also providing a wealth of opportunities including exchange traded funds (ETFs) with a sustainability focus that are allowing everyday Australians to tap into the push towards net zero carbon emissions.  

3. AI and transformative technologies 

We’ve been hearing a lot about artificial intelligence (AI) and other rapidly developing technologies over the past year.  

Some of these have the potential to be transformative. Others are very much in their infancy.  

The thing is, history has shown how risky it can be to jump onto the latest tech bandwagon. 

Seasoned investors will recall the bursting of the ‘dot-com’ bubble in 2000, which eventually saw the US NASDAQ index plunge by 75%.  

More recently, the hype around cryptocurrencies meant plenty of investors lost money when digital currencies nosedived in 2022. It speaks volumes about the largely unregulated crypto market that the owners of some high-profile crypto exchanges are now spending time behind bars. 

I’m not suggesting any dodgy practices among today’s tech companies. But as a long-term investor, I’m not a fan of diving into ‘the next big thing’. Fear of missing out (FOMO) may be a great motivator, but it doesn’t always lead to great decisions.  

4. The US Presidential election 

Buckle up and prepare for a long ride to November 5 when Americans head to the polls. 

It’s hard to escape news surrounding the US Presidential election, and the hype looks set to intensify over the next eight months.  

Will it affect my investment plans? No. 

It’s true that US shares have been impacted by past elections – typically with more positive rather than negative movements in stock prices.  

As a rule, though, long-term returns are more closely linked to what’s happening in the economy and inflation rather than who is moving into (or out of) the White House. 

5. Globalisation 

If you holidayed overseas this summer, chances are you were struck by how busy the airport was. 

Australians are back to exploring the world in a big way, and that’s great news.  

We’re just not quite as open-minded when it comes to investing. 

The latest ASX Australian Investor Study shows only 16% of us hold international shares. That’s almost zero increase from 15% in 2020.  

Yet over this time it’s become easier and more affordable to invest globally – thanks to falling brokerage costs and a wider range of global ETFs available on the ASX. 

Investing internationally can have downsides including currency fluctuations and geopolitical risks.  

The upsides include access to whole industries that aren’t represented on the Australian market, exposure to rapidly developing economies, and the benefits of portfolio diversity that can boost returns and smooth out volatility.  

My take is that Australia is a great place to live and work. But it’s a small pond (and a very sector specific one) to invest in. So, despite the potential drawbacks I’ll continue to have part of my portfolio invested internationally. 

If you don’t want the hassle of investing directly, ETFs are a low-fuss, low-cost way to add a slice of global action to your portfolio in 2024.  

 

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Paul Clitheroe
Paul Clitheroe
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