Want to Build a Profitable Portfolio? Here Are 6 Emerging Trends In The Stock Market in 2024

Stock Market Trends

Understanding stock market trends is vital for savvy investors. These trends focus on how investors allocate resources to different stocks and predict the performance of sectors, industries, and regions by year-end. Influenced by broad macroeconomic factors, these trends impact indices like Nasdaq and S&P 500. The analysis not only considers current trends but also looks ahead, offering a balanced and adaptable assessment for investors with varying styles and risk tolerances. Here are six strategies to consider: 

1. Invest in the Magnificent 7 

The 'Magnificent Seven' tech giants could perform well again in 2024, continuing their success from 2023 and driving gains for the broader market. Their potential for growth is tied to the increasing influence of AI, with companies like Microsoft and Alphabet actively involved in AI projects. Notable contributions include Microsoft's partnership with OpenAI and Alphabet's advancements like Bard and Gemini. Amazon's AI services through AWS and Nvidia's leadership in AI chipmaking contribute to the positive outlook. These trends are expected to benefit investors in these tech stocks, making it a significant theme to watch in the stock market. 

2. Dogs of the Dow Jones

Consider the Dogs of the Dow strategy in 2024, where you invest in high-dividend-yielding stocks from the Dow Jones Industrial Average. This strategy is ideal for those seeking income and can be a core or supplementary portfolio, emphasizing dividend stocks. The premise is that the highest-yielding dividend stocks are seen as undervalued. As these undervalued stocks gain value over time, their dividend yield decreases. To maintain the strategy's focus, it's important to rebalance annually, essentially following the principle of buying low and selling high. For January, potential stocks for the Dogs of the Dow include Walgreens, Verizon, and 3M.

3. Keep up with Emerging and Developed Markets

Apart from investing in the Majestic Seven and U.S. equities, some investors may find them too expensive. In 2024, considering emerging and developed markets is a noteworthy trend. Certain asset management firms predict that stocks outside the U.S. might perform better in both short and long terms. Beyond U.S. company valuations, another important factor is that these economies are younger or less developed, making them capable of quick value growth. For diversification, consider Exchange-Traded Funds (ETFs) like JPMorgan International Research Enhanced Eqty ETF, which invests in companies in developed foreign markets compared to the U.S.

4. Adjust to Inflation Trends

Analysts predict a significant drop in inflation this year, reaching 2.3% and then rising to 2% by 2026-2027, assuming a soft or semi-soft landing by the Federal Reserve, though this assumption is debated. When inflation decreases, alternative investments like gold tend to maintain value, originally bought as a hedge against inflation-driven volatility. Even with lower inflation, ongoing market uncertainty sustains demand for these assets. Furthermore, reduced inflation often prompts adjustments in central banks' policies, affecting currency values. As gold is priced in dollars, a weaker dollar makes gold more affordable for holders of other currencies, boosting demand and supporting its price.

5. Rebalance Portfolio

With decreasing inflation, there's an anticipated fall in interest rates, with a 75% chance of a cut in March as per current market expectations, and the possibility of more cuts ahead. Alternatively, if the U.S. economy stays strong and inflationary, interest rates might remain high throughout the year, despite a potential short-term cut in March. Eventually, it's reasonable to expect interest rates to return to their long-term averages. Investors can prepare by understanding that falling interest rates benefit a range of investments, including high-yield dividend stocks and speculative growth stocks. Additionally, falling interest rates can boost the prices of existing long-term bonds, a factor some are betting on in March.

6. Don't ignore Defense Stocks 

In 2024, global tensions are rising due to conflicts in Ukraine, the Middle East, and threats from China, North Korea, and Iran. Defense stocks like Lockheed Martin and Raytheon could see increased value as countries look to secure their defense. Asia, particularly in response to China's assertiveness over Taiwan, may witness a military build-up, impacting these defense companies positively. Besides being strong dividend growth firms, their involvement in high-growth areas like cybersecurity is expected to enhance their valuations, given the increasing demand for such services.