Investing trends in 2024
As the New Year is just around the corner and I don’t publish this newsletter during the holiday period, I thought I would get in early with some investment tips for the new calendar year.
Given the events of the past few years, it would seem the only thing we can expect is the unexpected and I’m sure you will join with me in hoping that somehow, we garner the political might to end both the war in the Ukraine and in the middle east.
Yet again we should all think ourselves lucy to live in a country where we can focus on the things that are really important in life and that is enjoying the company of those we love most, staying as healthy as possible and building financial security.
So here are my five tips for investing in the new calendar year.
1. It’s all about the economy.
Its never possible to forecast what will happen in the local economy much less the world economy with any accuracy but I think we can identify key trends that are likely to influence the financial markets and with that investing next year.
Inflation is likely to stay higher for longer and with that the Reserve Bank is likely to keep interest rates higher than most expect and for longer, with another interest rate hike almost certain in early 2024.
Despite the continued hype in the media, I think this will have dramatic implications for the domestic property market and anyone in a position where they have to sell a residential property during the next twelve months, can expect to sustain losses.
Against this, it is unlikely that the domestic economy will fall into a recession and unemployment is expected to continue to stay low. So, the message is to keep your head down, work hard and cut back where you can on unnecessary expenditure.
2. Stick with high yielding, blue chip shares.
Choosing the best approach to investing is always challenging and I spend most of my time trying to see what is coming over the investment horizon, and finding trends before they clearly emerge.
Having said that the prevailing taxation system, where the Government will effectively refund corporate taxes by way of franking credits, means the sweet spot for investing retirement funds remains in the blue chip, high yielding listed companies.
The Australian Tax Office released figures last month that Australia’s largest 2700 companies paid a record $83.8 million in income tax for 2021-22. The mining sector contributed just over half of this record amount, up from just a third of the overall corporate tax take in 2017-18.
The more tax a company pays, the better the profits. So I think we can be confident that life in corporate Australia is strong and this is still the place to invest funds.
3. The Awkard Age for ESG
There is no doubt that global warming and other environmental issues will continue to dominant the headlines in 2024, and they will increasingly influence what is happening in financial markets and the way companies operate.
Already the big banks are refusing to fund mining projects for example where there is no effort to minimise the environmental impact of such projects and everywhere shareholders are pressuring listed companies to uphold better corporate standards.
ESG or environmental, social and governance issues will dominate investment decisions, and this is becoming increasingly apparent among the investment goals of individual investors. The world is becoming a better place, and we should all embrace these changes.
4. Digital transformation
It’s difficult to write about the future of investing and not touch on the impact of digital transformation and how new technologies such as artificial intelligence, blockchain, and the Internet of Things are changing the way we all live.
Companies that leverage these technologies to enhance efficiency, streamline processes, and create innovative solutions are likely to attract investor attention over companies that don’t. Digital transformation will continue to shape investment strategies in 2024.
The challenge will be to embrace the right technologies because as with all technical change, there will be technologies that have their moment in the sun, only to fade with time. You only need to think of CD’s and DVD’s to know this is true.
It’s all about finding the right technologies that can deliver real and lasting benefits.
5. Focus on the basics.
Where does this leave all of us, who are living ordinary lives and just trying to get by as best we can.
For those that have yet to reach retirement age, the advice is simple. Focus on the key issues of repaying your home loan as quickly as possible and then boosting your superannuation balance with any spare cash you have.
For those who have reach retirement age, stay as active and as healthy as possible and be involved in whatever activities and hobbies that catch your attention. Underline this by maintaining a conservative approach to your finances and investments and make the most of every single day.