11th Dec 2023 13:24
(Alliance News) - After an "unpredictable and challenging" 2023 for investors, next year could prove to be similarly tricky, though tech stocks and a "green rebound" may be among the key themes at play.
RBC Brewin Dolphin also picked out a "closing gap between large and small caps" and focus on gold as two other "investment trends for 2024".
"It has been another unpredictable and challenging 12 months for investors – but so has every year since the outbreak of the Covid-19 pandemic. As the old cliché goes, if there is one thing that is constant, it is change, and that is only going to be the case as we continue moving forward. The central prognosis for 2024 from the majority of economists is that inflation will continue to ease and interest rates will start to fall – we don't know when and by how much, but there is largely consensus on those two points. If you accept that as the starting point for next year, then there are a few trends that seem likely to follow," RBC Brewin Dolphin analyst Rob Burgeman commented.
Burgeman noted a possible "green rebound" could be on the cards next year. While stocks and funds with a sustainable underpinning were popular during the pandemic, many "fell out of favour" this year, giving back some gains achieved between 2020 and 2022.
"Could next year be better for that area? Probably, yes. The drivers behind these investments are still there. While there was a wave of investment going into a range of different technologies, not all of them will work out, some were overly reliant on subsidies, valuations became unrealistic, and there was inevitably going to be some sort of correction. But, a lot of that has been flushed out and this segment of the market will be stronger for it," Burgeman added.
The analyst picked out FTSE 250-listed JLEN Environmental Assets Group Ltd as one way of gaining exposure to a possible green surge in 2024.
"Its portfolio includes a range of assets you'd typically expect, such as wind and solar electricity generation infrastructure, but it also includes waste and wastewater processing, anaerobic digestion, and battery storage facilities. The shares have suffered over the last 12 months, but its portfolio is still robust and well diversified, with strong results out recently and a commitment to capital growth and increasing its dividend," Burgeman explained.
Next year could also a "broader tech recovery", and not just one confined to some of the sector's biggest names such as Alphabet Inc, Amazon.com Inc, Apple Inc and Microsoft Corp.
The "magnificent seven", which also include chipmaker Nvidia Corp, Facebook owner Meta Platforms Inc and electric vehicle producer Tesla Inc, have been among those leading the way on New York's S&P 500 this year.
Some less illustrious tech names have struggled amid robust interest rates. But that could change if major central banks begin cutting interest rates next year, like many expect.
Polar Capital Technology Trust PLC, which invests in the likes of Apple, also offer exposure to smaller tech firms, RBC Brewin Dolphin's Burgeman said.
"However, it is worth bearing in mind that the trust comes with performance-related fees, which can make it an expensive choice," the analyst added.
Allianz Technology Trust PLC could be an alternative.
Large-caps have outperformed smaller counterparts during the rate-hiking cycle of the past years. Smaller firms have a greater exposure to debt costs as rates rise. But as central banks loosen monetary policy, small- and mid-cap stocks could get a reprieve, making life easier for London-listed abrdn UK Smaller Companies Growth Trust PLC.
"All things being equal" the fund should benefit as rates come down, Burgeman explained.
Finally, next year could have a "golden lining" the analyst tipped.
Gold surged past the USD2,000 an ounce mark to a record high last week. While it has lost some of its lustre on Monday, falling to USD1,993.47 on Monday afternoon UK time, the precious metal could habe a big 2024.
Burgeman, however, warned against getting an exposure to gold solely through miners.
"Some people are tempted to get exposure to gold through gold miners. However, these companies often operate in difficult parts of the world, which can incur a degree of political risk and cost. A gold spot ETF, such a WisdomTree Physical Gold, iShares Physical Gold, or Amundi Physical Gold should do the trick," the analyst explained.
By Eric Cunha, Alliance News news editor
Comments and questions to [email protected]
Copyright 2023 Alliance News Ltd. All Rights Reserved.
Related Shares:
JLEN.LPolar Capital Technology TrustAllianz Technology TrustAbrdn Uk Small