What will the investment scene look like in 2024

Ananyaa Bhowmik, Wealth of Geeks

Sixty-one percent of adults in the United States invested in stocks in 2023. Interest increased as the market seemed to be coming out of a potential recession. According to Forbes, S&P 500 earnings should grow 3.9% early in the year, and may even triple that growth by mid-year.

A few rising trends could affect people’s choice of investment this year. Artificial intelligence (AI) spearheads booming growth in the technology sector. Bonds are making a slow yet steady comeback. Traditional investments aside, alternative investments are starting to become a popular choice not just for the ultra-wealthy but also for individual investors looking to escape market volatility.


Artificial intelligence will continue being a market disruptor

Experts anticipate that investments in AI will soon be a driving force for the economy. The World Economic Forum (WEF) believes that technological advancement through artificial intelligence has the potential to solve global challenges.

Generative AI has emerged as one of the most disruptive technological advances since the smartphone, already having wide-ranging effects on the market and work methodology. According to economists at Morgan Stanley, more than 40% of jobs will be affected by the rise of AI in some way or another in the next three years.

Experts believe AI tech will disrupt many sectors, including education, health care, transportation, and manufacturing. In the long term, artificial intelligence should improve productivity and efficiency while helping lower operational costs.

Such tech may create new income avenues, especially for gig-earners. AI is also quickly emerging as a groundbreaking tool to solve hiring issues, especially for businesses with remote teams.

These advancements can help companies scour through hundreds of applications to find the right candidate, match applicants with the correct job profiles, and change the face of human resources for good. These countless opportunities are likely why institutional and individual investors are rushing to invest in the tech.


The rise of sustainable investment

Sustainable investing seeks financial returns while promoting long-term environmental and social values. It combines traditional investment approaches with Environmental, Social, and Corporate Government Insights (ESG).

In a January report, Morgan Stanley Institute for Sustainable Investing and Morgan Stanley Wealth Management claim that individual investors’ interest in sustainability is rising. They state that 77% of investors globally are interested in investing in companies or funds that don’t just focus on financial returns but also on making positive social and environmental impact.

New climate science findings and the financial performance of these investments contribute to the rising interest in sustainable investing. The report also found that 80% of global investors consider a company’s reporting on its carbon footprint and efforts to reduce greenhouse gas emissions when making investments. In 2024, investors are consistently adopting investment strategies that can help solve critical sustainability-related issues on a global scale.


Bonds are making a comeback

During the pandemic, the Federal Reserve’s near-zero interest rate drop boosted refinancing and homebuying. Now, it seems higher interest rates are here to stay for good. Though prospective homebuyers express disappointment, the interest rate hike poses an excellent opportunity for long-term and fixed-income investors.

Vanguard’s recent economic and market outlook for 2024 indicates, over the next decade, U.S. bonds should give yearly returns of 4.8-5.8%. Experts at Vanguard expect international bonds to show a 4.7-5.7% return over the next decade. If investors reinvest the returns, the bond returns should soon offset the effects of the losses investors incurred over the past two years.

Short-term corporate bonds could be a good choice for investment this year. Whether one invests through mutual funds, exchange-traded funds, or individual bonds, corporates should offer high yields with low risk. Treasury bills usually yield over 5%.
However, the right short-term corporate bonds may generate over 6% interest or more.


Alternative investment going mainstream

The alternative investment scene is booming. More investors seek to diversify their portfolios during this volatile market by making nontraditional alternative investments like real estate, infrastructure, private debt, and private equity. Many make alternative investments over traditional bonds and stocks to meet long-term saving goals.

Nasdaq projects that alternative investments under management should reach $17.2 trillion by next year, a fourfold increase since 2010. Many of these investments come from investors with high net worth or institutional investors. In 2020, the former group had half its assets invested in alternatives. The percentage is even higher for billionaires — around 51-54%.