As 2023 draws to a close, your investment focus will inevitably shift towards what lies ahead for the ASX next year. Anticipation is swirling around potential market trends, economic shifts and how certain sectors will perform, so let’s delve into some of our keen insights and predictions for the ASX in the upcoming year.
From emerging sectors to market sentiments, join us as we analyse the landscape and provide a comprehensive outlook for investors gearing up for 2024.
Reflecting on 2023
So, what made 2023 a year to remember? There were plenty of heady highs and some worrying lows, but it’s not just the turbulence of the market that we need to reflect on. Here are some key insights you can use to realign your ASX investment strategy for 2024 and beyond.
What happened in 2023?
The year was marked by big shifts in investor sentiment and concerns for both the Australian and global markets. At the start of the year, inflationary fears loomed large, with 20% of investors citing it as the most substantial risk to their investments.
However, as the year progressed, concerns began to pivot. One in five (22%) saw a potential global recession as the primary threat, surpassing inflation (18%). The anticipation of an economic downturn took centre stage and was largely attributed to higher interest rates on the horizon.
How are Australian investors feeling as we enter 2024?
Interestingly, despite the shift in concerns, Australian retail investors seem more confident overall, with 79% expressing optimism about the markets, up from 73% in June. This increased confidence extended beyond investments, as 68% felt upbeat about income and living standards. Even the Australian property market saw a rise in confidence, with 65% of investors expressing positivity compared to just over half (52%) earlier in the year.
Many investors are optimistic and forward-looking, maintaining a bullish outlook for the first half of 2024. Despite worries about a potential recession, the prevailing sentiment is in milder knock-on effects and a positive outlook for more favourable economic indicators in the year to come.
Investors are keen to raise their investment contributions over the next 12 months, with 32% planning to increase their regular contributions in the next three months. The data suggests a shift towards a more bullish approach in light of an optimistic economic outlook.
Australian market trends
The Australian market in 2024 may experience an easing in inflationary pressures, coupled with central banks gradually putting on the economic brakes. In other words, we’re looking at a potentially more favourable year ahead for the share market. What will ultimately shape this projection is whether or not recession concerns come to fruition.
The coming 12 months may also see a shift to a more positive market environment, primarily driven by easing inflationary concerns and strategic moves by central banks. Should these expectations materialise, it could set the stage for a positive trajectory for the ASX. However, a big influence will be the severity of any potential economic slowdown, with a milder recession likely to result in sustained market positivity.
Australia’s economic position
There’s plenty of anticipation around a slowdown in rising prices, which could potentially signal a change in the Reserve Bank of Australia’s (RBA) plans for interest rates. Arguably, the RBA might consider halting its plan to raise interest rates in the first half of 2024, and there’s even speculation about the possibility of interest rate cuts later in the year.
Factors like a slowdown in retail sales and the probability of higher unemployment rates suggest the RBA might shift its focus away from trying to curb rapid economic growth to instead providing it with a slight boost. Stay vigilant for these potential milestone events throughout 2024, as they will likely shape the economic landscape for the year ahead.
Key Australian sectors to watch
As interest rates plateau and potentially fall, the sectors most sensitive to these shifts – namely renewables and real estate – will draw plenty of attention in the first half of the year. Markets are also expected to re-examine cyclical sectors that have been struggling recently, including small-cap enterprises.
Industries like insurance and construction are slated for much higher scrutiny in 2024, potentially benefiting from economic adjustments and market movements. Amid these shifts, the ongoing focus on artificial intelligence (AI) will remain strong. AI-driven sectors are expected to be a huge draw for investors, especially as innovation explodes and new technologies transform a wealth of industries.
The bottom line? Expect plenty of changes in the ASX throughout 2024. With inflation easing and interest rates potentially trending downwards, the stock market is gearing up for an exciting year. Keep a close eye on real estate, renewables and AI, as well as potential surprise packages in construction and insurance. And as always, do your due diligence and research before investing in new assets.
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