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As the world continues to navigate an era of economic and technological transformation, the first quarter of 2024 provided a fascinating spectacle for the stock markets.
In this article, we dive into our selection of sectors that have dominated the stock market during these first three months of 2024. We will explore the dynamics that have propelled certain sectors to the top, while providing insight into the forces underlying underlying which have shaped their upward trajectories. We will conclude the article on the sectors to follow on the stock market for the rest of 2024.
What is the current economic situation?
While the global economy is currently experiencing a moderate economic slowdown, the global economic situation in the first quarter of 2024 was marked by several key factors, including a return of rising inflation in the United States, the geopolitical issues of the presidential elections upcoming American elections and the resurgence of tensions in the Middle East.
The United States has experienced a return of inflation since January 2024, with an annual inflation rate reaching 3.5% in March 2024 (compared to 3% at its lowest level in 2023). This increase in inflation calls into question the possibility of a reduction in interest rates by the Federal Reserve (Fed), because the reduction in rates was anticipated due to a drop in inflation observed during the year 2023. The return of rising inflation calls everything into question and the central bank could decide to maintain rates in order to control the rise in prices, especially since growth does not yet seem too penalized by rates raised in the USA.
The presidential elections in the United States, scheduled for the end of 2024, could also influence monetary policy. Historically, it is common for central banks to avoid making major changes in monetary policy just before elections so as not to influence the electoral process. This could mean any rate cuts could be delayed until after the election.
Concerns about the situation in the Middle East are also having an impact on stock markets during this first quarter of 2024. Although the repercussions of recent tensions on the oil markets are considered limited, they could nevertheless slow down the economic recovery scenario without completely calling it into question. An escalation of the conflict could lead the global commodity market into uncharted territory, with potential consequences for the global economy.
In summary, economic conditions in the first quarter of 2024 are complex and influenced by interconnected factors. Rising inflation in the United States, presidential elections and tensions in the Middle East are all factors that could have significant impacts on monetary policy, financial markets and the overall economy. However, in such a context, a few sectors of activity seem to be doing well.
Top 3 best performing sectors on the stock market in the 1st quarter of 2024
The technology sector on the stock market
In a constantly evolving economic context, the technology sector posted remarkable performance on the stock market during the first quarter of 2024. Driven by persistent enthusiasm for advances in artificial intelligence, the tech sector has continued to play a catalytic role in the transformation of various economic sectors. The growing adoption of AI by consumers has been a significant driver of the stock performance seen in the space.
At the same time, financial markets were attentive to forecasts of possible monetary easing. Expectations of falling interest rates, although shrouded in a veil of uncertainty, have led to increased interest in technology investments. Investors appear to be encouraged by the prospect of lower financing costs, which could encourage innovation and accelerate the development of growth-stage companies.
This climate of cautious optimism reflects a thriving technology industry, ready to meet the challenges of tomorrow and continue to breathe new life into the global economy.
Here is an example of an ETF that allows you to follow the tech sector on the stock market, the iShares MSCI Europe Information Technology Sector ETF (ISIN: IE00BMW42413). Below you can observe the performance of this ETF since the start of 2024.
Tech sector performance since January 1, 2024
Source: JustETF
The consumer discretionary sector on the stock market
During the first months of 2024, the consumer discretionary sector demonstrated notable economic vitality, driven by two key economic levers. On the one hand, contained inflation served as a catalyst for household spending, encouraging them to anticipate their purchases in the face of the prospect of an increase in prices. This dynamic is reinforced when the evolution of wages is in line with inflation, thus granting consumers increased purchasing power for superfluous goods, and in turn, stimulating sectoral activity in discretionary consumption.
On the other hand, the direct effect of rising prices on the revenues of companies in the sector cannot be underestimated. At the same time, a reduced unemployment rate reflects a greater proportion of the population enjoying stable employment and a regular income. This financial stability has a positive impact on discretionary spending, with consumers showing themselves more willing to allocate their budget to goods and services considered non-essential.
These factors, combined with renewed consumer confidence and an improvement in the economic situation, were the cornerstones of the excellent performance of the consumer discretionary sector on the stock market in the first quarter of 2024. A start of year which promises to be promising for players in this field.
Here is an example of an ETF that tracks the consumer discretionary sector on the stock market, the Xtrackers MSCI USA Consumer Discretionary ETF (ISIN: IE00BGQYRR35). Below you can observe the performance of this ETF since the start of 2024.
Discretionary consumer sector performance since January 1, 2024
Source: JustETF
The industrial sector on the stock market
In today’s industrial landscape, labor shortage has emerged as a major challenge, forcing companies to rethink their working methods. Faced with a reduced talent pool, they were forced to optimize their production processes and turn to automation. This transition has led to increased operational efficiency and more judicious management of resources.
At the same time, escalating raw material costs have tested the sector’s resilience. However, the industry has demonstrated a remarkable capacity to adapt. By exploring less expensive alternatives and solidifying partnerships with suppliers, industrial companies not only overcame obstacles but also ensured continuity of their supply.
These proactive strategies demonstrate the industrial sector’s ability to adapt in the face of economic disruption, while highlighting the importance of innovation and flexibility in an ever-changing market.
Here is an example of an ETF that allows you to follow the industrial sector on the stock market, the SPDR MSCI Europe Industrials ETF (ISIN: IE00BKWQ0J47). Below you can observe the performance of this ETF since the start of 2024.
Industrial sector performance since January 1, 2024
Source: JustETF
What are the sectors to follow on the stock market for the rest of 2024?
The second quarter of 2024 is shaping up to be a pivotal period for the financial sector and the real estate sector, particularly in Europe. Analysts agree that several indicators point to an environment conducive to the growth of these sectors.
The European Central Bank (ECB) is expected to opt for a cut in interest rates at the end of the first half of the year, ahead of the United States in this approach. This strategic divergence could result in a strengthening of the euro, making it all the more attractive for international investors, with possible positive repercussions on the European real estate market.
The ECB’s anticipated rate cut is also likely to give new impetus to the economic recovery, thereby stimulating financial and banking activities.
However, we must remain vigilant in the face of geopolitical risks, notably the conflict in Ukraine and its economic repercussions, without forgetting the threat of resurgent inflation within the European Union. Despite these uncertainties, current signals suggest a second quarter of 2024 bringing good news for the financial and real estate sectors on the old continent.
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