As we head into 2024, it is becoming increasingly challenging to predict what might happen in markets, economies, and businesses. The stock market’s global boom in 2023 has left us wondering about the uncertainties that lie ahead. Additionally, the upcoming election in November adds another layer of complexity to the market. Nevertheless, we must embrace the challenge and share our thoughts on the new year. It is important to note that these predictions are not actionable investment advice but rather ideas to fuel debate and discussion.
Traditionally, we would provide five ideas for the new year, but this time we are going with “four for ’24.” The first prediction suggests that there may be bankruptcies among some wind, solar, or battery stocks. Given the high leverage, interest rates, and the lack of demand in certain markets, it is likely that some companies in the “industry of the future” will struggle. In 2023, SolarEdge and NextEra Energy Partners experienced significant losses in their market value. The Invesco Solar ETF (TAN) also saw a decline of 30%. However, there is still hope for solar power as it continues to grow and could eventually surpass coal as a source of global electricity generation. Wall Street firm T.D. Cowen recommends focusing on companies with utility-scale solar projects, such as First Solar. Analysts predict a positive future for First Solar, with a median price target of $231.56. While there is potential for success, there are risks such as interest rate fluctuations, government permitting delays, investor disinterest in renewable energy, and political backlash.
Brazil has often been the subject of jokes regarding its potential as an investment destination. However, we believe that Brazil is on an upswing, and its stocks will benefit and possibly outperform the U.S. market. With unemployment below 7%, Brazil presents a favorable environment for growth. Moreover, the country’s vast natural resources, including soybeans, iron ore, coffee, sugar, and oil, contribute significantly to its economic potential. Brazil is quietly becoming an oil superpower, producing over 3.5 million barrels per day with the possibility of reaching 4 million in the near future. Keeping an eye on the iShares MSCI Brazil (EWZ) ETF can provide insights into Brazil’s market performance. Nonetheless, factors such as a strong U.S. dollar, declining oil prices, market saturation, or limited growth may hinder Brazil’s success.
Contrary to the majority of optimistic calls, we anticipate lower or stagnant prices for both oil and gas in 2024. While global oil demand is expected to grow, the economic challenges faced by China could limit the rate of increase. Additionally, global oil supplies remain abundant, with Brazil and Guyana emerging as rising stars in oil drilling. Russia continues to dominate global markets despite sanctions, and OPEC has implemented measures to balance production levels. Furthermore, China may embark on a path to boost its local oil production for national security reasons. However, the Middle East situation, production cuts by OPEC+ and Saudi Arabia, or an unexpected surge in global demand could disrupt this prediction.
The year 2023 witnessed the dominance of mega-cap stocks, often referred to as the “Magnificent 7.” While these stocks may continue to perform well, it is essential to explore opportunities beyond them. Several undervalued small-cap stocks offer potential for growth and should not be overlooked. It is hoped that 2024 will be a year of market diversification, where new money finds its way into other areas. However, there is a possibility that investors will continue to focus solely on the “Mag 7” and other high-cap stocks, ignoring valuation concerns. Moreover, any slowdown in the U.S. economy would likely impact smaller-cap stocks more severely.
Predicting the future is an inherently uncertain task, especially in an ever-changing economic landscape. As we approach 2024, it is crucial to critically assess the possibilities that lie ahead. While bankruptcies in renewable energy stocks, Brazil’s rise, and oil price fluctuations dominate the predictions, it is important to remember that unforeseen events can always overturn expectations. The key is to approach these predictions as starting points for insightful discussions and debates rather than definitive investment advice.
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