Investing in sectors | 2024 Outlook for investors | Fidelity (2024)

FAQs

What sector is best to invest in right now? ›

Sector investing can be appropriate for strategic, long-term investors as well as investors looking to manage a portfolio tactically. Strategic investors can use sector investing to take advantage of potential long-term trends in certain sectors.

Since 2023, industries such as clean energy, AI, finance, and banking appeared as promising opportunities for investors.

Fed Projections

In its latest long-term economic projections released in December, the Federal Open Market Committee projects core PCE inflation of 2.4% and GDP growth of 1.4% in 2024. FOMC members also anticipate just three interest rate cuts by the end of 2024.

Real Estate. Real estate is a popular choice because it becomes a more useful and popular store of value amid inflation while generating increased rental income. Investors can buy real estate directly or invest in it by purchasing shares of a real estate investment trust (REIT) or specialized fund.

Think about the things consumers will need no matter what – those are the sectors that tend to perform well during market downturns. Even amid high inflation, people still need gas, groceries and health care, so things such as consumer staples and utilities usually weather bear markets better than others.

Higher Risk: Sectoral funds are generally riskier than diversified funds because they are more narrowly focused. The performance of the fund is heavily dependent on the performance of the sector it invests in.

Sector trading is a form of active trading that typically involves a higher level of risk than investing in the broader stock market. The worst sectors to invest in, based on median returns, are information technology, energy, utilities, and materials.

Sector funds can be more volatile because of their narrow concentration in a specific industry. See page 23 for Important Information section in the appendix, including investment risks. Sector funds can be more volatile because of their narrow concentration in a specific industry.

What sectors are not doing well? ›

The S&P 500 utilities and consumer staples sectors are two of the worst-performing sectors in the large-cap benchmark index this year, down 10.6% and 2.4%, respectively.

Health and insurance sector has seen tremendous growth in the past two years after covid outbreak because people realize the importance of good health and having insurance. According to Invest India, the health sector is likely to grow by 16-17% and is about to hit $372 billion by 2024.

We continue to forecast about 4% average 2024 GDP growth for emerging markets worldwide, led by growth of about 5% for emerging Asia. We anticipate growth of 2%–2.5% for emerging Europe and Latin America, though U.S. growth could have positive implications for Mexico and all of Latin America.

Analysts expect overall S&P 500 earnings to rise 10.4% in 2024, LSEG data showed. But stocks are also at high valuation levels. The S&P 500 trades at a forward price-to-earnings ratio - a commonly used metric to value stocks - of 20.9, well above the index's historic average of 15.7, according to LSEG Datastream.

With profit margins that actually expand as rates climb, entities like banks, insurance companies, brokerage firms, and money managers generally benefit from higher interest rates. Central bank monetary policies and the Fed's reserver ratio requirements also impact banking sector performance.