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Experts and analysts expect slow growth for the British investing landscape in 2024. Along with Japan, Britain was the only nation in the G7 that slipped into recession at the end of 2023.
Regardless, this hasn’t stopped investors from seeking the most promising opportunities this year to combat economic challenges. But what should Brits allocate their funds to in 2024?
The Name’s Bond, James Bond
Stephen Snowden, head of fixed income at Artemis, described corporate bonds as the best buying opportunity of the decade. Government bonds (or ‘gilts’) are also noteworthy.
Bonds have always had a reputation for providing lower returns than the more popular markets. Indeed, bond investors went through rough times in 2021 and 2022 mainly due to the Bank of England’s interest rate hikes. The central bank raised the interest from 0.10% in February 2021 to 3.50% at the end of 2022.
Yet, investment strategy analyst at Vanguard Europe Lukas Brandl-Cheng believes the long-term outlook is better than ever. First, bond returns recovered in 2023 despite the ever-increasing interest rates. Brandl-Cheng expects this market to deliver annualised returns of about 4.4–5.4% in the next decade.
Of course, these aren’t impressive yields. Yet, the analyst suggests the magic lies in the power of compounding. Furthermore, investors should consider bonds an avenue to ‘smooth’ out or offset gains from higher-risk markets like equities and cryptocurrencies. The aim is to include bonds in a diversified portfolio instead of focusing solely on them.
Good ‘Ol Stocks
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Recent findings from HSBC, when surveying British investors, found that 44% were putting their money in shares. Goldman Sachs has even said that the UK equities market may outperform Wall Street, the Eurozone, and Japan in 2024.
Despite their unpredictability in recent years, stocks remain relatively good investments. The first consideration in this regard is the outlook on the FTSE 100, which gained about 4% in 2023.
While a positive figure, this pales in comparison to the granddaddy of stock indices, the S&P 500, yielding around 24%. However, it’s not all doom and gloom for British stocks. These shares are noticeably cheaper than those in other regions.
A recent chart from Morgan Stanley Research shows that UK stocks traded at a discount of c.40%, which is better than the median of c.20% compared to the MSCI World Average Valuation Premium.
Multinational financial services provider Allianz sees uncut gems in three areas. The first is in the small to mid-cap market. Their analysts cite package holiday company Jet2 as a prime example, which should deliver 300% year-on-year revenue growth.
The second focus area is large-cap stocks, with companies like AstraZeneca, Unilever, BP, Shell, and HSBC fitting the bill. Additionally, Allianz also highlights the strong risk-to-reward balance of the energy and banking sectors.
Diversity in Index Funds
The upcoming elections in the United Kingdom (in 2024 or no later than January 2025) present a surprising investment opportunity.
AJ Bell, a UK-based share dealing and dealing account investment services provider, has analysed election statistics since 1962. They concluded that the FTSE All Share Index rose by an average of 12.8% a year after an election that led to a government change.
Despite the FTSE 100’s underwhelming returns, Brits should look at index funds. These are more diversified than the FTSE 100 and FTSE All Share Index, focusing on several sectors in the UK stock scene. The best-performing index funds available for UK investors also account for the top-performing S&P 500.
Another option is bond index funds. Instead of relying on UK bonds, investors can consider these funds (e.g., the Vanguard Global Bond Index Fund) derived from the bonds of other relatively safe governments and companies globally.
The Wild West of Crypto
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Finally, it’s worth mentioning cryptocurrencies as an alternative for British investors — albeit the riskiest. Findings on the historical performance of the Bitcoin index (according to Curvo) from August 2011 to February 2024 show a 109% compound annual growth rate. Needless to say, this figure is much higher than that of other assets. Moreover, altcoins (or non-Bitcoin assets) have produced better numbers in the last few years.
The first immediate, warranted concern held by traditional investors is the high volatility within. Also, cryptoassets themselves aren’t regulated despite the presence of the Financial Conduct Authority.
Even with these risks, institutional players, once anti-crypto, have poured billions of dollars into this financial asset. Such commitment is evidence that Brits should give digital currencies a chance in their portfolio.
Ensuring A Risk-Conscious Investing Journey in 2024
Brits have many investing options to explore, whether it’s the tried-and-tested route of stocks and bonds, the uncharted territory, or the diversity of index funds. Diversification is among the first risk-conscious strategies to navigate these many markets.Investors should also consider software like TradingView to help them analyse these financial assets in more detail and uncover trading opportunities.
