INVESTING IN 2024: FORECASTING THE KEY FINANCIAL TRENDS 1

The topsy-turvy ride in financial markets over the past couple of years will settle as economies ease into a more normal, postpandemic environment. Interest rates are likely to fall, which should give sharemarkets a boost, but don’t expect a return to the super-low rates of the past.

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Investing in bonds will remain a good way to lock in higher rates over the medium term, generating a steady income stream with lower volatility than shares. At the end of last year, the interest rate from bonds issued by established New Zealand companies was close to the highest it’s been in more than a decade. 3

For long-term investors, market valuations sitting at historical average levels make it a solid time to buy in, with the focus shifting from performance within a particular sector to variations between individual companies. After strong 2023 returns for the “Magnificent 7” — Apple, Alphabet (Google’s parent company), Microsoft, Amazon, Meta, Tesla and Nvidia — other tech stocks may offer better value. 4

The impact of climate change and the need to prepare for a low-carbon future continue to challenge the world’s economy, with 2023 officially confirmed as the hottest year on record. Options to invest in decarbonisation include funds such as the GMO Climate Change Trust and the iShares Global Clean Energy ETF, and companies with renewable energy operations or that contribute to the energy transition. 5 Despite its tragic human toll, the IsraelHamas conflict has had limited influence on financial markets. However, geopolitical risks and political uncertainty are expected to persist, with the upcoming US elections in November taking centre stage. While global tensions can add some volatility to the markets, any impact is generally short-lived. 6

Companies to watch in 2024: Ryman Healthcare, Precinct Properties, Mainfreight, AFT Pharmaceuticals and The a2 Milk Company are five New Zealand stocks tipped to outperform.