Stratiphy’s 2024 Outlook
Where investors dust off their crystal balls and make predictions the year ahead 🔮
It is the time of year when investors dust off their crystal balls and make predictions for the year ahead. This is Stratiphy’s investment outlook for 2024.
Disclaimer: The information provided here is for informational purposes only and hopefully a bit of fun - it is not financial advice. Past performance is no guarantee of future performance, and you should always conduct your own research before making investment decisions. If you need investment advice you should consult with a qualified financial advisor.
AI - A call for explainability amidst unprecedented growth?
The potential of artificial intelligence is immense in almost every walk of life. New technologies have already been transformative with ChatGPT alone reaching 100 million users within a record breaking 2 months of its launch in November 2022, and we believe this growth will continue. However, there are concerns about the pace of development, lack of regulation, and its possible impacts. Publicly available LLMs (Large Language Models, eg ChatGPT) have faced criticism for plagiarism and for not citing or explaining sources. There are also concerns that bad actors can misuse AI, and the main concern is that the scale and page of their nefarious activities could vastly outrun anything we have seen before. It is therefore more important than ever that developers place an emphasis on explainability and trustworthiness, otherwise those spearheading this incredible new field could be the ones that do the most to undermine it.
The consequences of geopolitical tensions
Global conflicts worsened considerably in 2023, which is a depressing state of affairs and one with very real ramifications in the markets. The world is currently facing two different major wars, and posturing could easily tip over to further conflicts. Safe havens such as gold, the Greenback and to some extent crypto have seen a boost, and given the nature of the tensions demand for defence-related industries seems likely to remain strong.
Low growth casting a shadow on retail
Low economic growth seems likely within the retail sector next year. The Bank of England predicted no growth in 2024, and even this week there was a surprise fall in UK GDP. Along with the repercussions of elevated interest rates affecting households and businesses, consumer spending will pose a challenge for retail-related investments. The ongoing global supply chain disruptions, exacerbated by geopolitical tensions and the lingering effects of the COVID-19 pandemic, may well further constrain the sector.
Property valuations on a slippery slope
The central bank’s base rate has a major influence on the cost of mortgages, and it rose to a 15 year high to 5.25% in August. Many analysts believe mortgage rates are likely to stay elevated well into 2024. If that happens, it is likely to strain consumer finances further, and if a vicious cycle ensues it could further depress the real estate market. This, in turn, could have a negative impact on pension funds and other long-term investments that are exposed to the retail sector.
Don’t rule out carbon markets
Fundamentals tend to overpower short-term influences in the long term, and the carbon markets are unlikely to be any different. There is a fundamental and increasing need to decarbonise, and the carbon markets are the most internationally backed and established mechanism designed to achieve that. With new regulations requiring increasing climate disclosures and mitigation measures, these markets may see a boost that takes them far from the subdued lows seen in 2023.
Transforming lifestyles and habits cannot happen overnight, and so we believe governments are the key catalysts for driving sustainable change on a larger scale. Regulatory measures can act as a powerful force in steering our collective behaviour toward greener alternatives, and in this context, the expanding role of carbon markets becomes increasingly significant by offering businesses a means to offset their carbon emissions.
Where could the next unicorn come from? 🦄
Whilst it’s never easy to see the next game-changer a few things are on our radar. We view health tech and hydrogen fuel cells as sectors which present promising scientific frontiers, holding the potential for global impact.
The rise of personalised medicine, driven by advancements in genomics, diagnostics and AI has some notable players in the field including Illumina, Inc. (ILMN) and Thermo Fisher Scientific Inc. (TMO).
The spotlight on hydrogen fuel cells continues to grow, as the world seeks more sustainable solutions. There is likely space for both electric, and hydrogen powered transport. Hydrogen is more appropriate for heavy-duty transport like buses and lorries, for which we expect electric power is quite unsuitable. Unlike electric battery technology, hydrogen has not seen such high growth in the past decade, it may just be a late bloomer with the growth ahead of us.
The increasing demand for clean energy sources and the global push toward decarbonisation make hydrogen fuel cells a noteworthy sector to watch. Companies like Plug Power and Ballard Power Systems show the potential in this field, with the application of hydrogen fuel cells in diverse industries, from transportation to industrial manufacturing.
Remember, investing is a journey filled with both opportunities and challenges. Stay informed, seek appropriate diversification within your portfolio, and make decisions based on thorough research and analysis with Stratiphy.