What a difference a year makes! This time last year market pessimism was widespread. Many investors were preparing themselves for a recession as well as another down year for stocks. But just like history has shown, the economy and markets always seem to surprise us – the S&P 500 index ended the year up 26.3% and the rally has continued through the first quarter this year. (markets up 10% YTD) As we enter Q2 2024, even with this latest rally, the best strategy continues to be staying focused on our long-term plans. Here are 5 keys to investing in 2024 to help with just that.
1. The Election Pressure
Political news is sure to take over the media and headlines in 2024. More than half of the world’s population will be heading to the polls and with heated debates over immigration, international policy and social issues, there will undeniably be disputations.
With the uncertainty of an election, there will likely be higher volatility within the markets, specifically at the start of campaign season. The good news is that despite the results of any election, volatility often creates growth opportunities for patient investors.
2. Sitting in Cash
2023 was a rough year for the markets and investors. Fearful investors poured billions of dollars into cash and cash-equivalent instruments. With the constant uncertainty over inflation and the direction of interest rates, it seemed natural for investors to look for safety and reassurance driving them to money market funds and cash equivalents with attractive rates. But, after the fourth quarter rally of 2023, investors may have realized that staying on the sidelines has its own risks. It may be time to rethink positions, as staying in cash may have investors missing out on opportunities and thus put their long-term goals at risk.
3. Diversification is key
We all know that diversification is a key element when investing, but why is this so prevalent for 2024? Looking back at 2023 it was the big tech stocks, otherwise known as the Magnificent 7, that saw share prices soar while everything else remained flat. With such a small number of U.S. stocks generating a sizable portion of the overall market gains it makes us question where to invest this year. Since October, we have seen a broad base recovery, as all the other stocks/sectors are now playing catch-up to the Magnificent 7. This is where diversification is key; having a diversified portfolio
will allow for greater return potential and downside protection despite where markets decide to go.
4. The comeback story in Bonds
For the first time in 45 years bonds declined in tandem with stocks for a full calendar year in 2022. In 2023 bonds continued to be volatile which has left investors questioning the stability and diversification bonds have always provided in the past.
Though bonds have underperformed, we are finally starting to see light at the end of the tunnel. As inflation continues to fall faster than expected, the U.S. Federal Reserve has indicated it is done raising interest rates – this news triggered a fourth quarter rally across bond markets, stated in the article Keys to investing in 2024 by Capital Group. Yields have also risen significantly across credit sectors making bonds the potential comeback story of 2024.
5. There’s always a reason not to invest
Unfortunately, you can’t time or predict the markets. There never seems to be a “right time” to invest and there are always dozens of reasons why you should wait. But it is best to tune out the noise. News drives turbulence in the short term, but company fundamentals drive markets in the long term. Stick to your investments, be patient and tune out the noise.
As always, if you would like to discuss your portfolio please don’t hesitate to contact us.
Have a great weekend,
Tracey & Paige
Source: https://advisoranalyst.com/2024/02/07/5-keys-to-investing-in-2024.html/
Photo by Luke Ellis-Craven on Unsplash
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