7 Ways to Profit from the Emerging Trends in the Stock Market in 2024

Stocks to buy

There are a few stock market trends that savvy investors will want to keep on top of. These trends are centered around the composition of investor flows to different equities, as well as leaning on forward projections of which sectors, industries, and geographies will come out on top by the end of the year.

The stock market trends discussed in this article are based on the broad macroeconomic tailwinds that are powering indices like the Nasdaq and S&P 500. These trends also pay attention to how they could shift into the future, reflecting a well-balanced and flexible assessment that can be applied by investors of different investing styles and risk tolerances.

So if discovering the best stock market trends interests you, then read on. Here are seven ways you can profit from them.

Stock Market Trends: Invest in the Magnificent Seven

The ‘Magnificent Seven’ mega-cap tech stocks could be strong performers this year to make for a repeat performance in 2024. These companies drove the majority of the gains for the broader indices in 2023.

The key reason that the Magnificent Seven could continue to deliver gains is due to the exponential rise of AI, which is expected to be a key growth driver. Some Majestic Seven companies with AI projects in the works include Microsoft (NASDAQ:MSFT) with its partnership with OpenAI and Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) AI advancements like Bard and Gemini.

Other developments include Amazon’s (NASDAQ:AMZN) AI services through AWS and Nvidia’s (NASDAQ:NVDA) dominance in AI chipmaking. Many others are pointed to be highly accretive for investors who invest in Majestic Seven stocks. This makes it one of those vital stock market trends to keep on top of.

Focus on the Dogs of the Dow

In 2024, investors can follow the Dogs of the Dow strategy, which involves investing in the top dividend-yielding stocks in the Dow Jones Industrial Average.

This strategy is great for income-focused investors and can be as part of one’s core portfolio or as a satellite portfolio with an individual concentration on dividends stocks. The main premise of the strategy is that the highest-yielding dividend stocks are assumed to be undervalued.

As the undervalued stock prices of these companies increase over time, the dividend yield decreases. An annual rebalancing is necessary for the strategy to maintain its focus. This makes it the same as buying low and selling high.

Some of the stocks to consider for the Dogs of the Dow for January include Walgreens (NASDAQ:WBA), Verizon (NYSE:VZ), and 3M (NYSE:MMM).

Stock Market Trends: Keep an Eye on Emerging and Developed Markets

The other side of the coin to investing in the Majestic Seven and U.S. equities in general, is that for many investors’ tastes, their valuations might be too rich and expensive, regardless of their projected revenue growth.

For this reason, investors should also consider the value of emerging and developed markets as one of those stock market trends for 2024.

Some asset management companies have predicted that equities outside of the U.S. could outperform domestic ones over both long and short-term periods. Putting the valuation of U.S. companies aside, another key reason is that these economies are younger or less developed than the U.S. and therefore can quickly climb in value.

For investors who want to hedge their bets, there are ETFs like the JPMorgan International Research Enhanced Eqty ETF (NYSEARCA:JIRE) that invests in companies in developed foreign markets to the U.S.

Adapt to Inflation Trends

If analyst forecasts are anything to go by, then inflation will likely cool significantly this year. Forecasts predict it will decline to 2.3% this year and increase to 2% by 2026-2027. This is, of course, assuming that the Fed can pull off either a soft or semi-soft landing. This may be a big assumption according to some.

When inflation goes down, alternative investments such as gold and other precious metals tend to hold their value, even if they were initially bought as a hedge against the volatility that inflation causes. Even when inflation decreases, the uncertainty and volatility in the market may not necessarily disappear immediately, which sustains the demand for such assets.

Furthermore, when inflation rates decrease, it often implies that central banks might adjust monetary policies, potentially impacting currency values. As gold is priced in dollars, a weaker dollar can make gold cheaper for holders of other currencies. Thus, its demand increases and supports its price.

Stock Market Trends: Position Your Portfolio for Falling Interest Rates

Going hand in hand with reduced inflation is falling interest rates, which theoretically will coincide. In the immediate term, the market is pricing in a 75% chance interest rates will fall in March this year. More cuts could be on the horizon.

Another counterfactual is that the U.S. economy will remain strong and inherently inflationary for the foreseeable future. Thus, interest rates will remain high for the rest of the year – despite a short-term cut in March.

But at some point, it’s reasonable to expect that interest rates will revert to their long-term averages. Investors can do their part to prepare for this. Falling interest rates are a boon for investments across the board, ranging from high-yield dividend stocks to speculative growth stocks.

Falling interest rates also increase the price of existing long-term bonds, which some are betting on in March.

Consider Defense Stocks

The world is heading into a very tense and unpredictable period in 2024. We’ve seen the conflicts in Ukraine and between Hamas and Israel. Meanwhile, there are looming threats to the U.S. and its allies from China, North Korea, and Iran, and independent threats from terrorism, both domestic and international.

Defense stocks could rise in response to these global security challenges. I expect an increase in valuation for names like Lockheed Martin (NYSE:LMT) and Raytheon (NYSE:RTX), among others, that allow countries to secure their defense.

I expect the military build-up to be prevalent in Asia, with many countries arming themselves in response to a progressively more assertive stance by China over Taiwan, which it has claimed since the 1940s.

In addition to being strong dividend growth companies, defense companies also have high-growth operating segments such as cybersecurity. Such companies could play an increasingly important role in their valuations as demands for these services soar.

Green and Sustainable Investing

The latest World Economic Forum met in the middle of this month. The spotlight was on green and sustainable investing and changing our perceptions of what we consider to be economic growth.

I feel this will result in potential long-term benefits of investing in green technology, clean energy, and sustainable practices. The market for sustainable investments is expanding rapidly. This includes sectors like renewable energy (solar, wind), electric vehicles, and energy-efficient technologies. The shift towards a low-carbon economy creates opportunities in these areas as governments and corporations worldwide commit to sustainability goals.

There are many ways that investors can hop on board the sustainable investing trend. These methods range from direct equity investments in companies like Tesla (NASDAQ:TSLA) to buying units of ETFs that have strict ESG criteria and more.

On the date of publication, Matthew Farley did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Matthew started writing coverage of the financial markets during the crypto boom of 2017 and was also a team member of several fintech startups. He then started writing about Australian and U.S. equities for various publications. His work has appeared in MarketBeat, FXStreet, Cryptoslate, Seeking Alpha, and the New Scientist magazine, among others.

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