Trend Watching Wednesday – What to Watch in 2024

Change is the only constant.

My Grandpa Max was born in London in 1903 and he told me how the kids used to follow motorcars around to see where they were going as they were such a rare sight when he was little. Cars did not have electronic ignitions until 1911. The toaster wasn’t even invented until 1919 but Max Davis got to fly on the Concorde at 1,300 miles per hour and saw the earth curving beneath him. He even had Internet access (on his TV) in the 90s (and his 90s). 

Here we are, still early in the 21st Century and we’re already having conversations with our computers – I’m very much looking forward to the rest of this century! This year promises to be a pivotal one, marked by technological breakthroughs, socio-economic shifts, and geopolitical undercurrents. At PhilStockWorld, we’re not just observing these changes; we’re keeping you ahead of them – dissecting each trend to uncover the hidden gems in the vast expanse of the market where we can.

From the democratization of AI transforming business operations to the subtle nuances of global trade dynamics, 2024 is not just another year; it’s a chapter in the annals of economic history waiting to be written. Our mission? To guide you through these uncharted waters with insights that are as sharp as they are actionable. We’re not just looking at the trends; we’re looking through them, identifying the companies poised to not just survive but thrive in this dynamic environment.

Marc Emmer put up a great list of trends to watch over at Inc.com and I decided we should take that list and delve into it from an investing standpoint to help equip you with the knowledge and strategies that can turn these changes into opportunities.

1. Democratized AI: The integration of AI into everyday tasks, particularly with accessible applications like Microsoft’s Copilot and Google’s Bard, suggests a shift in how businesses operate. Investors should look for companies that effectively integrate AI to streamline operations and create new customer experiences. The key here is to identify firms that are not just using AI, but using it innovatively to gain a competitive edge.

• • Microsoft (MSFT): With its integration of AI through Copilot in the Office suite, Microsoft is a key player in making AI accessible for everyday tasks.
  • Alphabet Inc. (GOOGL): Despite slower adoption, Google’s Bard AI shows potential in integrating AI into the vast Google ecosystem.

2. Waning Consumer Demand: The expected decrease in discretionary spending due to economic factors like unemployment and student loan stress indicates a potential shift in consumer behavior. Investors might consider focusing on companies that offer essential goods and services or those that can adapt to changing consumer priorities.

• • Procter & Gamble (PG): A leader in consumer staples, P&G offers essential goods that remain in demand even during economic downturns.
  • Walmart (WMT): As a major retailer known for value, Walmart could benefit from consumers prioritizing budget-friendly options.

3. Higher Unemployment: With unemployment projected to rise, sectors that are traditionally more resilient to economic downturns, such as healthcare and utilities, might become more attractive. Additionally, companies that offer cost-effective solutions or cater to a more budget-conscious consumer could see increased demand.

• • Anthem, Inc. (ANTM): As another major player in the healthcare insurance sector, Anthem could also see stable demand due to its diversified healthcare services and products, especially in a landscape of rising unemployment.
  • NextEra Energy (NEE): As the world’s largest producer of wind and solar energy, NextEra Energy stands out in the utility sector. Its focus on renewable energy positions it well for long-term growth, especially considering the increasing emphasis on sustainable energy sources. Additionally, its stable revenue stream from utility operations makes it an attractive option for investors seeking resilience in uncertain economic times.

4. Wage Rationalization: As wage inflation cools, businesses might see a reduction in labor cost pressures, potentially improving profit margins. However, this could also mean less disposable income for consumers, affecting sectors reliant on discretionary spending.

• • Amazon (AMZN): With a diverse business model, Amazon could navigate the changing wage landscape while capitalizing on its efficiency and scale.
  • McDonald’s (MCD): As a fast-food leader, McDonald’s may benefit from consumers seeking more affordable dining options.

5. AI Wage Inequality: The potential marginalization of low-income workers due to AI adoption could lead to broader social and economic challenges. Investors might consider companies that are addressing these challenges through corporate social responsibility initiatives or those developing technologies to upskill workers.

• • Salesforce (CRM): Known for its corporate social responsibility, Salesforce could be a key player in addressing workforce challenges through technology.
  • IBM (IBM): IBM’s focus on AI and upskilling initiatives positions it well to tackle the challenges of AI wage inequality.

6. AI Killer Apps: The proliferation of AI applications in areas like billing automation, recruiting, and inventory management suggests efficiency improvements across various industries. Companies that are early adopters or developers of these applications could offer promising investment opportunities.

• • Adobe Systems (ADBE): Adobe’s creative and business software often leads in integrating AI, enhancing productivity and creativity.
  • Intuit (INTU): With products like QuickBooks, Intuit is at the forefront of using AI for financial and business applications.

7. Moderating Treasuries:  The Congressional Budget Office projects the 10-year T-bill to stabilize around 4% in 2024. This moderation in treasury yields, after peaking at 5%, suggests a more predictable interest rate environment. For investors, this could mean a shift in strategies, favoring fixed-income securities or sectors sensitive to interest rate changes. Mortgage rates and auto loans are expected to normalize, potentially impacting the housing and automotive sectors.

   • JPMorgan Chase & Co. (JPM): As a leading financial institution, JPMorgan could benefit from a more stable interest rate environment, particularly in its lending and investment services.
   • Goldman Sachs Group Inc. (GS): Known for its investment banking prowess, Goldman Sachs might see improved performance in a normalized rate environment, especially in areas like asset management and advisory services.

8. A New Energy Ecosystem: Following the COP28 Summit, there’s a global push towards meeting the Paris Accord milestones. This shift towards a sustainable energy ecosystem will likely benefit companies involved in renewable energy, electric vehicles, and energy-efficient technologies. Investors should watch for companies that are not only adopting sustainable practices but also innovating in this space.

   • Tesla, Inc. (TSLA): A frontrunner in electric vehicles, Tesla is well-positioned in the transition towards sustainable energy and transportation.
   • Enphase Energy, Inc. (ENPH): Specializing in solar energy solutions, Enphase Energy could play a significant role in the evolving energy landscape, particularly with the push for net zero emissions.

9. Elements in Demand: Lithium, copper, and nickel are becoming increasingly valuable due to their use in electric vehicles and other technologies. With EVs expected to become mainstream in 2024, reaching about 18% of U.S. volume, companies involved in the mining, processing, or recycling of these elements could see significant growth.

   • Albemarle Corporation (ALB): As a major producer of lithium, Albemarle stands to benefit from the increased demand for lithium in EV batteries and other technologies.
   • Freeport-McMoRan Inc. (FCX): This leading miner of copper and molybdenum is well-positioned to capitalize on the growing demand for these essential elements in various industries, including electric vehicles and renewable energy.

10. Normalized Inflation: Economists suggest a new normal for inflation, higher than the past decade but lower than current rates. This environment requires businesses to be agile in pricing strategies and cost management. Companies with strong brand loyalty or essential products might navigate this better. Investors should look for firms with robust pricing power and efficient operations.

• • The Coca-Cola Company (KO): As a consumer staples giant, Coca-Cola’s diverse global presence and strong brand could help it navigate and adapt to an environment of normalized inflation.
  • Johnson & Johnson (JNJ): A leader in healthcare products, Johnson & Johnson’s wide range of essential goods might see steady demand even in a moderately inflationary environment.

11. Congressional Stall on Debt: The inability of Congress to effectively address debt issues could lead to periodic government shutdowns. This uncertainty might affect sectors heavily dependent on government contracts or funding. Defense and infrastructure could be areas of interest, as military spending is often prioritized.

• • Raytheon Technologies Corporation (RTX): As a major defense contractor, Raytheon could benefit from continued government spending on defense, despite broader fiscal challenges.
  • Lockheed Martin Corporation (LMT): Another key player in the defense sector, Lockheed Martin’s diverse portfolio in aerospace and defense makes it a potential beneficiary of sustained military spending.

12. No Letup in Healthcare Costs

• With healthcare costs projected to increase by 5.4% in 2024, companies in the healthcare sector, especially those offering cost-effective solutions or essential healthcare services, could see steady demand. This trend also highlights the importance of innovation in healthcare to manage rising costs.
  • UnitedHealth Group (UNH): Already mentioned earlier, UnitedHealth’s diversified healthcare services could see continued demand, especially as healthcare costs rise.
  • Pfizer Inc. (PFE): A leading pharmaceutical company, Pfizer is well-positioned to navigate the healthcare landscape with its strong pipeline of drugs and vaccines.

13. Aging of America: In 2024, the U.S. will see over 60 million people over the age of 65, presenting challenges for the retirement system. This demographic shift could increase demand for retirement-related financial services, healthcare, and senior living facilities. Investors might consider companies that provide retirement planning services, healthcare tailored to seniors, or real estate investment trusts (REITs) specializing in senior living. Forbes discusses the potential pension comeback in 2024, and AARP outlines major changes impacting retirement finances in 2024.

• • Brookdale Senior Living Inc. (BKD): As one of the largest operators of senior living communities in the United States, Brookdale is well-positioned to cater to the growing senior population.
  • Humana Inc. (HUM): A leader in health insurance, Humana’s focus on Medicare Advantage plans makes it a key player in healthcare for the aging population.

14. Not-so-affordable Housing: With the average home price at $407,000 and rising mortgage rates, housing affordability is a significant concern. This trend could impact the real estate market, homebuilding companies, and mortgage lenders. Investors might look at companies offering affordable housing solutions, innovative financing options, or those involved in the construction of lower-cost homes.

• • Lennar Corporation (LEN): As a prominent homebuilder, Lennar could benefit from a focus on more affordable housing solutions.
  • Rocket Companies, Inc. (RKT): Specializing in mortgage lending, Rocket Companies could see growth by offering innovative financing solutions in a challenging housing market.

15. Large-scale Weather Events: The increase in billion-dollar weather events, coupled with El Niño conditions, emphasizes the importance of disaster recovery and climate resilience. This trend could benefit companies specializing in disaster recovery services, infrastructure repair, and climate adaptation technologies. Investors should consider the growing market for climate resilience and disaster mitigation.

• • Generac Holdings Inc. (GNRC): Known for its backup power generation products, Generac could see increased demand due to more frequent and severe weather events.
  • American Water Works Company, Inc. (AWK): As the largest publicly traded U.S. water and wastewater utility company, American Water Works is crucial for infrastructure resilience and repair.

16. Clean Hydrogen: Hydrogen is emerging as a key player in the renewable energy sector. The shift from traditional sources like coal and natural gas to solar and wind-derived hydrogen could open up new investment opportunities in renewable energy companies, particularly those focused on hydrogen production and related technologies.

• • Plug Power Inc. (PLUG): A leader in providing hydrogen fuel cell solutions, Plug Power is at the forefront of the clean hydrogen revolution.
  • Ballard Power Systems Inc. (BLDP): Specializing in proton exchange membrane fuel cell technology, Ballard Power Systems is a key player in the hydrogen fuel cell industry.

17. The Drones are Here: The expansion of commercial drone applications in areas like agriculture, real estate, and infrastructure indicates a growing market. Companies that manufacture drones, provide drone-related services, or utilize drones for operational efficiency could be attractive investment options.

• • AeroVironment, Inc. (AVAV): A major supplier of unmanned aircraft systems, AeroVironment is well-positioned in the expanding commercial drone market.
  • Trimble Inc. (TRMB): Known for its GPS and other positioning technologies, Trimble’s solutions are increasingly used in drone applications for surveying and mapping.

18. New Wearables: The resurgence of augmented and virtual reality, with new products from companies like Meta and Apple, suggests a booming market in wearables. This trend could impact the tech sector, particularly companies involved in the development and production of AR and VR technologies, as well as content creators and service providers in this space.

• • Apple Inc. (AAPL): With its strong track record in wearables like the Apple Watch and ongoing investments in AR and VR, Apple is a key player in this market.
  • Meta Platforms, Inc. (META): Formerly Facebook, Meta’s significant investments in AR and VR technologies position it as a leader in the new wave of wearable tech.

19. Infrastructure Spending: The Bipartisan Infrastructure Law is set to significantly impact infrastructure development in 2024. This law will channel funds into various projects, including roads, bridges, and mass transit, which could benefit construction and engineering firms, as well as suppliers of building materials. Brookings discusses the two-year anniversary of the infrastructure law, and The Hill talks about the expected impact in 2024. 

• • Caterpillar Inc. (CAT): A leading manufacturer of construction and mining equipment, Caterpillar is likely to benefit from increased infrastructure spending.
  • Vulcan Materials Company (VMC): As the largest producer of construction aggregates in the U.S., Vulcan Materials stands to gain from the demand for building materials driven by infrastructure projects.

20. ESG (Environmental, Social, and Governance): The increasing focus on ESG practices means companies are integrating sustainability, equity, and inclusion more deeply into their operations. This trend could benefit firms that provide ESG consulting services, as well as companies with strong ESG records, which may attract more investors and customers.

• • BlackRock, Inc. (BLK): As a global investment management corporation, BlackRock has been a vocal proponent of ESG investing, which could attract more investors to its ESG-focused funds.
  • NextEra Energy, Inc. (NEE): A leader in renewable energy, NextEra Energy’s strong focus on sustainable practices aligns well with the growing emphasis on ESG.

21. Cyber Coverage: With a significant portion of businesses experiencing cyber-attacks, the demand for cyber insurance and cybersecurity solutions is on the rise. Companies providing cybersecurity services, software, and insurance could see increased demand as businesses seek to protect themselves from digital threats.

• • CrowdStrike Holdings, Inc. (CRWD): A leader in cloud-delivered cybersecurity, CrowdStrike’s services are increasingly vital in protecting businesses from cyber threats.
  • Palo Alto Networks, Inc. (PANW): As a multinational cybersecurity company, Palo Alto Networks offers advanced cybersecurity solutions that are crucial for businesses seeking to bolster their digital defenses.

22. China Decoupling…Sort of: The complex trade relationship between the U.S. and China, characterized by partial decoupling, suggests a shift in global trade dynamics. Companies that can navigate these changes, whether through supply chain diversification or by capitalizing on new trade patterns, could be well-positioned for growth.

• • Apple Inc. (AAPL): Despite the complex U.S.-China trade dynamics, Apple’s strong brand and diversified supply chain enable it to navigate these challenges effectively.
  • Taiwan Semiconductor Manufacturing Company Limited (TSM): As a key player in the semiconductor industry, TSMC’s role in global electronics supply chains positions it well amidst shifting U.S.-China trade relations.

23. Presidential Election: The 2024 presidential election could bring significant policy changes, affecting various sectors. Companies that are adaptable to regulatory changes and those involved in sectors like defense, healthcare, and energy, which are often influenced by government policies, might be particularly interesting to watch.

• • Lockheed Martin Corporation (LMT): A major defense contractor, Lockheed Martin could benefit from policy changes related to defense spending following the presidential election.
  • UnitedHealth Group Incorporated (UNH): Given its significant role in the healthcare sector, UnitedHealth Group is well-positioned to adapt to policy shifts that may arise from the election.

24. Expansion of the Military Complex: Increased military spending, regardless of the election outcome, could benefit defense contractors and technology firms involved in military applications. This trend suggests opportunities in aerospace, defense, and advanced technology sectors.

• • Raytheon Technologies Corporation (RTX): As a major player in the aerospace and defense industry, Raytheon stands to benefit from increased military spending.
  • Northrop Grumman Corporation (NOC): Specializing in aerospace and defense technology, Northrop Grumman is well-positioned to capitalize on the expansion of the military complex.

Max Davis was a great Investor – he was very good at spotting trends and we can be too. When you see everyone buying radios and TVs (1923), buy the companies that make them but also go the extra step and think about companies that will need to create content for them. Jet engines were invented in 1930, how about investing in companies that build airports? It often pays to think out and around those boxes!  

2024 will be more than a series of trends; it’s a testament to the ever-evolving nature of the market. Each sector we’ve explored, from AI’s groundbreaking advancements to the critical shifts in energy and healthcare, underscores a fundamental truth: informed, forward-thinking investment strategies are key to navigating these dynamic times.

At PhilStockWorld, our commitment goes beyond analyzing trends. We strive to provide a beacon of clarity in the complex world of investing, empowering you, our Members, with the insights and foresight needed to make decisions that are not just timely but timeless. The companies we’ve highlighted are more than mere stocks; they are potential vessels of growth in a sea of uncertainty, chosen for their ability to harness the winds of change.

As we move forward into 2024, let’s do so with eyes wide open to the opportunities that lie ahead. The landscape may shift, and challenges will arise, but with a blend of skepticism and a little humor along with our unwavering focus on the horizon, we stand ready to turn these challenges into stepping stones for success. 

Together, let’s embrace the future – here’s to a transformative year ahead! 

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