Stock Market Predictions: Sectors to Outperform in 2024

The recent selloff in tech stocks gave investors a fright, however the market continues to be within the midst of a bull run and analysts say certain sectors are poised to outperform within the second half of the yr.

Last Tuesday, the tech-heavy Nasdaq posted its worst single-day performance since 2022. Nonetheless, on Monday the index gained 1.68% and stays up over 22% in 2024. Meanwhile, the S&P 500 — which dropped 2.86% between last Tuesday and Friday — is up 1.09% Monday and 17.33% on the yr.

Investors who pay close attention to the market’s day by day movements could have whiplash from this sort of heightened volatility. However the episode offers yet one more example of short-term market fluctuations that will be disregarded by well-prepared buy-and-hold investors.

What’s noteworthy going forward is that the market has demonstrated ongoing strength particularly outside of tech, providing validity to a broad-based bull market that now features a handful of industries that previously weren’t participating. Listed below are three sectors of the stock market which might be widely expected to outperform over the following few months.

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Energy stocks are soaring

The heavily cyclical energy sector is again proving appealing for investors with long-term horizons. Over the past month, energy has seen the second-largest gain out of all 11 sectors by a posting 4.21% increase despite the worth of West Texas Intermediate — the U.S. benchmark for crude oil — not having surpassed $90 per barrel because the summer of 2022.

Energy is especially attractive as a second-half play for investors because of the industry’s outlook and the way cash-rich its top corporations currently are. For the past six years, the U.S. has produced more crude oil than some other nation, and the expectation is that 2024 will change into the seventh consecutive yr.

In response to the U.S. Energy Information Administration, “Crude oil production in america … averaged 12.9 million barrels per day (b/d) in 2023, breaking the previous U.S. and global record of 12.3 million b/d, set in 2019. Average monthly U.S. crude oil production established a monthly record high in December 2023 at greater than 13.3 million b/d. The crude oil production record … is unlikely to be broken in some other country within the near term because no other country has reached production capability of 13.0 million b/d.”

Moreover, Saudi Arabia’s state-owned Saudi Aramco recently scrapped plans to extend production capability to 13 million barrels per day by 2027, leaving the U.S. because the likely top producer through the top of the last decade.

Big Oil can also be displaying its fundamental strength through share repurchase plans, that are funded through free money flow and serve for example of an organization’s financial wellbeing. Earlier this yr, the Natural Resources Defense Council reported that “Big Oil spent staggering sums on stock buybacks, funneling profits straight to shareholders and executives … ExxonMobil, Chevron, Shell, TotalEnergies SE, and BP Plc spent $113.8 billion on dividends and stock buybacks in 2023.”

Oil stocks benefitting from energy sector momentum and forecasts include ExxonMobil, which is up 4.41% over the past month, and Kinder Morgan, which has gained 10.15% over the identical time.

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The return of real estate

Over the past few years, the true estate sector has been hampered by the Federal Reserve’s monetary policy and the resultant rate of interest hikes. This has slowed down the housing market and seen the stocks of real estate investment trusts (REITs) go idle.

Because the start of 2022, the true estate sector is down -21.42%. But with the increased likelihood of the Fed cutting its benchmark rate of interest at its September meeting, REITs are back on the upswing. Over the past month, the S&P 500’s real estate sector has gained 5.28% — tops amongst all 11 sectors.

Residential REITs, that are heavily dependent upon mortgage rates, are performing particularly well and are forecast for strong finishes in 2024. Shares of Camden Property Trust, for instance, were down around -1% from the beginning of the yr through May 29, but have risen 14.48% since, alongside growing rate-cut expectations.

In response to CBRE, an actual estate services and investment firm, business real estate can also be prone to begin picking up within the second half of the yr. Specifically, “[d]emand for brand spanking new data center development will attract more institutional investment in 2024, as investors reallocate capital from the office sector to real estate alternatives.”

Tech stays king

Over the past month, tech is the one S&P 500 sector within the red, having posted a lack of -4.55%. Those losses have been recently punctuated by mega-cap corporations like Nvidia and Amazon posting losses since July 10 of 8.58% and seven.99%, respectively. Nevertheless, much of that selloff will be attributed to investors grabbing gains after a record run-up in share prices by the Magnificent Seven stocks.

The medium- and long-term forecasts for the tech sector stays incredibly strong. Demand for AI-enabling microchips, cybersecurity and cloud computing continues to grow exponentially. Subsequently, analysts’ price targets for top tech stocks proceed to allude to the next ceiling, which is currently evidenced by Nvidia’s 4.62% gain on Monday alone.

In response to Deloitte’s “2024 Technology Industry Outlook, “[p]redictions for growth in global IT spending in 2024 cover a spread from 5.7% to eight% … fueled largely by double-digit growth in spending for software and IT services in 2024. Analysts estimate that public cloud spending will grow by greater than 20%, they usually foresee stronger demand for cybersecurity. AI investment (not specifically generative AI) can also be seen as contributing to overall spending growth. Economists have projected that AI-related investments could reach $200 billion globally by 2025, led by america.”

Consequently, despite its recent pullback, the tech stays one in every of — if not the — strongest sectors for investors for the rest of the yr and into next.

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