Dubai: When it comes to money, these start-of-year questions often come with a lot of added pressure: What if my investment decision backfires this New Year? Will I be richer or poorer by the end of the year? Can my savings last the entire year?
With many turning their attention towards understanding trends and concerns that could shape the investment landscape in 2024, we will look at what themes to buy into this year, what industries analysts see booming, and what investments are worth putting your hard-earned money this year.
“Investors should not ignore the fallout of the highest interest rates and the lag effects inflicted on many aspects of the global economy throughout 2024,” said Brody Dunn, an investment manager at a UAE-based asset advisory firm.
According to French multinational universal bank BNP Paribas, “huge lagged knock-on effects” will be observed in areas such as real-estate prices and savings with high returns not seen since the Global Financial Crisis (GFC).
But what does this mean for investors? Money managers are seeing pockets of opportunity with investments like stocks and exchange-traded funds (ETFs), when used in benefitting from the below-mentioned trends. Investment experts also flag the below as “credible” investments for this year.
Investors should not ignore the fallout of the highest interest rates and the lag effects inflicted on many aspects of the global economy throughout 2024
Investment trend #1: Artificial intelligence
The past year, 2023, was widely deemed to be a monumental year for artificial intelligence (AI), with generative AI (GenAI) applications such as ChatGPT, which led to increasing number of use cases and experiments to test the technology.
According to Dunn, the buzz over generative AI triggered global demand that was “barely fulfilled”, while global management consultant McKinsey & Company described 2023 as the technology’s breakout year.
“Less than a year after many of these tools debuted, one-third of our survey respondents say their organisations are using gen AI regularly in at least one business function,” the consulting firm noted recently, having surveyed 1,684 participants at all levels of global organisations.
McKinsey also saw 40 per cent respondents increasing stock investments in AI because of advances in generative AI. “This year, 2024, will see further maturation of generative AI alongside growth in the deployments of other AI-run applications,” said Mohammed Shaan, a UAE-based investment advisor.
“AI is much larger than Gen AI, and many companies now seem ready to explore the full spectrum of AI techniques and practices. Researchers view 2024 to be the year when many new stock investors will realise how more organisations worldwide turn AI into a game changer.”
Investment trend #2: Sustainability
Veteran investors have also been evaluating how this year may see investors increasingly prioritise the transition of businesses away from fossil fuels and other environmentally harmful investments towards the expanding suite of sustainable investing options now offered by financial firms.
“With the year set to go down as the hottest year ever recorded, that transition by businesses may be steep. Companies will also likely respond to this progress with their own accelerated transitions, aligning themselves more stringently with global climate goals,” said Dunn.
Global investment bank Morgan Stanley Capital International (MSCI) said that an orderly transition by companies towards sustainability will prevent the loss of almost $8 (Dh30) trillion in listed companies’ market values. “So it is prudent for stock market investors to profit from this boost in market valuations of companies,” he added.
The MSCI analysis highlighted real-estate investors as being among the most significantly impacted, given that property stocks could be vulnerable to declines on higher costs of transitioning to low-carbon economies over the coming decades, the MSCI estimated.
Also, MSCI estimates insurance costs surging due to more frequent and severe weather patterns. How this affects investors is that stocks of insurers will ultimately face the risk of falling as more costs of the transition to sustainability emerges for investors.
Investment trend #3: Bitcoin ETFs
Bitcoin price is widely expected to rocket towards $50,000 (AED....) by the end of the year after the US Securities and Exchange Commission finally gave the green light to spot Bitcoin exchange-traded funds. But what does this mean for investors looking to profit from this latest development?
“Investors were hotly anticipating the potential approval of Bitcoin ETFs and the new approval marks a key milestone for the cryptocurrency market in the investment avenue gaining acceptance to mainstream financial markets,” said Brian Deshell, a UAE-based cryptocurrency trader and analyst.
“The high price of a single Bitcoin has often made the crypto investment beyond the reach of most investors worldwide. This is why there has been a lot of interest in finding alternative ways to invest in Bitcoin and reduce the risks that come with directly buying the top cryptocurrency.”
Bitcoin exchange-traded fund (ETF) is one such alternative. With it, investors can get exposure to cryptocurrencies without having to go through the trouble of setting up a wallet or dealing with erratic exchanges.
“By buying shares of a Bitcoin ETF, you can gain exposure to the price movements of Bitcoin, and investors should be convinced that by investing in a regulated product like a Bitcoin ETF, their money will be safer than investing in crypto directly,” added Deshell.
Regardless, whether you invest in the Bitcoin ETF or in cryptocurrency directly, financial experts have widely recommended that you only invest what you can afford to lose.