- It’s a “stock pickers environment for 2024,” says wealth manager and financial advisor Brianne Gardner
- Canadian Securities Exchange CEO Richard Carleton expects growth in mining and technology and a continued focus on AI in 2024
- “Eighty percent of returns come from being in the right sector,” Gardner says
- Gardner believes in diversifying across asset classes, focusing on active management, de-risking the portfolio and being flexible and agile
As we enter into a new year and welcome 2024, its a great time to look ahead at emerging and growing sectors as well as investment strategies.
The Market Herald Canada spoke with Richard Carleton, CEO from the Canadian Securities Exchange, and Brianne Gardner, wealth manager and financial advisor with Velocity Investment Partners at Raymond James. We discussed investment opportunities in 2024 and artificial intelligence, and Gardner shared her investment strategy for coming year.
TMH: What sectors will lead investment opportunities in 2024, Brianne?
Gardner: I think for us, we are overweight, positioned our clients portfolio overweight a little bit defensively again ahead of all the concerns that we see. We like to be proactive in our investment strategy, and position portfolios for that and to be able to weather the storm.
So shifting a little bit more defensively. So for us, that means overweight healthcare. I think given our expectations of market choppiness and, you know, where the S&P is in the short term, we think that healthcare is a great defensive sector to own, especially, again, a low beta gives us kind of an incentive to be in the sector.
Also communications services and utilities. So at the end of the day, you still have to pay your phone bill. If you go into a recession or not, and where consumers are going to be cutting costs, it’s going to be on consumer discretionary items like shopping, travel, clothing, etc. So we know that communications and utilities do tend to continue to perform well and have positive earnings trend.
So those actually have been sectors that have been beaten up (last) year, and we think they are going to see a push and more people shifting into that, into those sectors that are also sensitive to interest rates, which will benefit them when cuts do happen.
TMH: OK, Richard, what sectors do you think, or do you feel, will lead investment opportunities in 2024?
Carleton: Well, I’m about as far from an investment advisor as you could get. So, you’re putting me in a bit of a position. But what I do know is this: Because we have a view of about 6 months forward, in terms of what companies are coming into the market, as we speak to the investment bankers, the entrepreneurs, the auditors, the lawyers and so on that are working with early stage companies that are getting funding … there’s no doubt that we’ll see a continuation of new opportunities in the mining space.
We’re seeing a very extensive number of technology companies, and of course that’s a very, very broad category to fit people into, and many of them (are) looking for different applications of generative AI and so on. Although, not in and of itself, but as a tool to smooth over some business process or address some inefficiency in a particular industry.
TMH: And talking about AI, what are your thoughts on AI on the markets?
Gardner: I think 2023 was the year AI really did kind of explode onto the scene. I do still believe that the AI adoption is really just beginning. I think in the coming years, or this year anyways, it’s happening quickly, right? It’s been disruptive in the workforce, in the markets (and) in the economy. I think enterprise AI adoption and product integration will definitely leap forward.
We’re already seeing that in multiple dimensions, such as text, sound, video, more all at once again, users of ChatGPT, and kind of not just communicating models via text, but also uploading images and voice prompts. I think I saw a recent study from, I believe it was Goldman Sachs, that showed that the sectors that will see the greatest increase in earnings because of AI – obviously technology, but also industrials and healthcare, right? If you think of operations and minimizing errors on an operating table.
So I do think that we will start to see AI incorporated across the board for us. We own Amazon, which is poised to benefit from its capabilities. AI workloads with their Amazon Web services. We also own Merck, a great healthcare (company), and they did two partnerships with AI-related companies for drug discovery and a higher probability of success.
Carleton: And from my perspective, again, I think people need to constantly remember that AI is a tool, right? And I mean, I’m, you know, an old guy. I’ve been around for a while. I remember when robotics was the thing. You know, the people who made the money were not people who built the robots or designed the robots.
It was the companies that figured out how to make cars of higher quality (with) lower costs and higher margins. And that’s exactly, I think what we’re going to see here. And the big difference is, you know, again, robotics changed manufacturing and industrial processes across the board.
This is going to leach into … the generative AI is going to change the delivery of services, I think, quite dramatically. And in ways that, you know, in fact, to be blunt, probably reduce the number of people quite dramatically in a whole variety of industries. So again, this is an example when you’re going through the drive thru at your favourite fast food joint, you’re going to be talking to generative AI.
At some point within probably the next year. There will be far fewer people that are involved here. Ultimately, that is, in fact, extremely deflationary in the economy as the investment in technology was hard, technology was for previous generations or iterations of the market.
So again, I think you will see, and Brianne is right that as you look at different companies that are poised to take advantage, to reduce costs, to increase margins, to increase the range of services that they perform, are the companies that investors should be looking at.
TMH: Brianne on that note, human to human, what is your strategy for 2024?
Gardner: Yeah, I do think it is going to be a difficult year ahead. I think, you know, going from back before 2020, kind of a 10-year bull market. I don’t think we’re going to see that anymore, especially with all of this technology advancing. I think it’s going to be important to focus on being in the right sectors.
Eighty percent of returns come from being in the right sector. So again, especially during volatile times and interest rates coming down, it is going to be, you know, you’re going to have to be tactical, and I think (have) asset class focus as well.
So shifting, for us, we are active managers. So shifting in and out of cash, knowing when to take profits, waiting to see these signals when the Fed does signal rate cuts are coming, exploring opportunities in bonds.
So we’ve been adding to our bond exposure, and we think those are going to be a big benefiter of 2024, just with interest rates coming down will increase our bond prices and kind of push bonds up, especially after a Fed pause – just a pause, not even cuts. You do tend to see bonds perform double digits.
So for us, we have started tactically shifting our portfolios to almost be overweight, fixed income, and we see a tactical opportunity for the next 12 to 24 months. I still believe in diversifying across asset classes, though, and again, focus on active management, de-risking the portfolio, being kind of flexible and agile.
And then again, I do think it’s going to be a stock pickers environment for 2024.
For more market insight into 2024 in terms of a bear or bull outlook, check out our previous interview with Carleton and Gardner and take a look at our interview with Kevin Matsui from CARE AI at the University of Guelph who discusses areas of AI investment.
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