Will the underperformers of 2023 be the winners of 2024?

Roy Kaitcer, Investment Manager at Redmayne Bentley
 
There is no doubt that 2023 has been a very challenging year for most investors. Having a diversified/balanced portfolio could include a percentage of fixed interest, property and alternatives. These sectors of the market have been badly affected by the rise in interest rates, which has seen a rise from 0.5% in February 2022 to 5.25% currently. Inflation has been a large factor contributing to this increase as the Bank of England look to bring down inflation to its goal of 2%.
 
With interest rates looking to stabilise in the UK and US, stock markets, as they do, look ahead, and we are already seeing a recovery in some of these sectors as markets look forward to a reduction in both interest rates and inflation. Hopefully, this will continue in 2024. Although, as ever, there are no guarantees.
 
3 Sectors to watch in 2024
 
1: Retail: Retail sales, while falling back, have tended to be fairly resilient. Stocks such as Marks & Spencer, Frasers Group (Sports Direct) and B&M Bargains are flirting with 52-week highs.

2: Property: We are already witnessing a recovery in the main property stocks as markets look forward to a potential cut in interest rates. Stocks such as British Land and Land Securities (Landsec) are showing modest recovery in their share prices.

3: Real Estate Investment Trusts (REITs) and alternatives: Again, both these sectors have been decimated this year as net asset values are reducing or perceived to be so. Stocks such as LXi REIT and Primary Health Properties are already showing modest recoveries from their recent lows. Both these sectors offer potentially attractive income yields (6% plus in some cases) which has been a compensatory factor during this savage downturn.
 
However, should inflation start to rise again or prove stickier than expected, then interest rate cuts will not be forthcoming, and the sectors and stocks mentioned above could well fall back in the short-term.
 
Please note that this communication is for information only and does not constitute a recommendation to buy or sell the investments mentioned. Investments and income arising from them can fall as well as rise in value. The information and views were correct at time of publication but may have changed at point of reading.