3 Key Factors To Better Protecting and Growing Your Investments for a More Profitable 2024

As we enter the new year, signs of inflation abating and rates finally easing have put investors’ minds more at ease, following a fairly challenging 2023. While there are still some concerns — notably around reignited concerns about a potential recession, geopolitical issues and an election year — LPL Financial argued in its 2024 Outlook, that this year will mark a “turning point” to “a more recognizable place.”

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“Despite a likely mild recession in 2024, both bonds and stocks should do well as we anticipate the Federal Reserve will begin to roll back some of 2023’s interest rate increases,” Marc Zabicki, LPL Chief Investment Officer, said in the Outlook.

Against that background, what are the key themes investors should pay attention to in order to better protect and grow their investments?

Are Bonds Back?

Bond prices and yields move oppositely, so if the Federal Reserve begins cutting rates — as many economic forecasters believe they will — it’s likely to push bond prices up broadly, said Peter C. Earle, senior economist, American Institute for Economic Research.

“By how much, though, is a different issue,” he said, adding that one complicating factor to be aware of is a gap between Fed and market projections of the degree to which interest rates may be cut. Earle noted that the market seems to be predicting cuts that are twice as deep as the Fed has suggested — so the bond market may be set up for disappointment.

“Another factor is that if the Fed has to cut as deep as the market thinks it will, there’s probably a deeper problem – a recession, maybe a worsening of a geopolitical hotspot, something of that nature,” he added.

Will Stocks Continue To Rise?

According to Earle, it’s very difficult to say what the stock market will do, yet,  stocks ran up 17% from mid-October 2023 through the end of the year. “That sharp move upward, although quite welcome for investors, may have stolen a little wind from 2024’s sails,” he noted.

Earle further argued that it’s critical to note the implicit trade-off in this year’s macroeconomic scenarios: if the Fed lowers rates substantially, it will probably drive equity market prices up.

On the other hand, if the Fed finds the need to lower rates substantially or quickly, it’s likely because of negative circumstances of the type that bite into corporate earnings, he added. “So, if anyone is banking on Fed moves to boost stock prices, there’s a somewhat narrow path there.”

What About the Tech Sector?

Holding the “Big Seven” tech giants — Apple, Alphabet, Amazon, Meta, Microsoft, Nvidia, and Tesla — is the most crowded trade on Wall Street these days, according to Earle.  

“I wouldn’t discount the possibility of continued performance in these names, but I do think that there are many other tech stocks that are likely being overlooked,” he said, adding that in an election year where inflation hasn’t yet been tamped down and there are increasing geopolitical sources of risk, momentum can change swiftly.

Other experts argue that the new tech bull market has now begun, and tech stocks are set up for a strong 2024 — as Wedbush Securities analysts expect them to be up 25% over the next year led by Big Tech “as the AI spending tidal wave hits the shores of the broader tech sector.”

“We believe now the rest of the tech sector joins the Magnificent 7 party in this rally into 2024 with AI tailwinds abound,” Wedbush Securities analyst Dan Ives said in an investors’ note.  “Our favorite tech names remain Apple, Microsoft, Google, Palo Alto, Palantir, Zscaler, CyberArk, Crowdstrike, and MongoDB.”

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This article originally appeared on GOBankingRates.com: 3 Key Factors To Better Protecting and Growing Your Investments for a More Profitable 2024

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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