As the year 2024 closes, let’s look at how some of the investing categories performed, what we might expect next year, and what to watch out for in choosing future investments.
Cryptocurrencies
Despite their volatility, cryptocurrencies such as bitcoin continue to attract investors due to their potential for high returns.2024: Bitcoin has seen a year-to-date increase of approximately 129 percent. This significant rise has been driven by factors such as the outcome of the 2024 U.S. presidential election and the April 2024 “halving“ event.
2025: If President-elect Donald Trump follows through on his promise to make bitcoin investing easier and streamlined and creates a Bitcoin Strategic Reserve, these are bullish signs that the crypto could increase even further.
Caveat: Bitcoin is highly volatile and largely speculative. Although it has been touted variously as a currency, a security, a commodity, an inflation hedge, and a technology, thus far it has only served as a means of enticing people to invest with the hopes that the market price continues to go up.
AI Stocks
Companies such as Nvidia and Palantir Technologies, which focus on artificial intelligence (AI), are expected to see strong growth.2024: Nvidia has had an impressive performance in 2024, with a year-to-date increase of 171 percent. This strong growth is part of a broader trend, as Nvidia has seen significant returns over the past few years.
2025: Nvidia is the plumbing for high-end AI data centers. Their expensive GPUs have been in hot demand largely from the biggest high-tech companies such as Google, Meta, Microsoft, Amazon, and, more recently, Elon Musk’s new AI project.
Caveat: The strong demand for high-end semiconductors has yet to manifest itself in profitable products and services offered by big tech companies. Generative AI continues to be plagued with errors (called “hallucinations”), and despite continuing efforts to make the AI output more trustworthy, it remains to be seen whether the fundamental scaffolding of Gen AI can be trusted as reliable enough for decisions to be based on the output.
Pharmaceutical Stocks
With an aging population, pharmaceutical companies such as Novo Nordisk and Eli Lilly are promising investments.2024: Pharmaceutical stocks have shown mixed performance in 2024. While some companies have seen significant gains, others have faced challenges. Here are a few notable examples:
- Vertex Pharmaceuticals Inc (VRTX): Vertex has stumbled, and its stock price decreased by 13 percent in terms of its 20-day moving average.
- Eli Lilly and Company (LLY): Eli Lilly has done well, its Alzheimer’s disease drug donanemab received Food and Drug Administration (FDA) approval in July 2024.
- Novo Nordisk (NVO): Novo Nordisk continues strong in its focus on treatments for diabetes and obesity.
The adoption of AI and advanced data analytics will likely turbocharge clinical development. Increased integration of health technology and AI in standard operations will both streamline processes and improve efficiency. Companies with diverse product portfolios are most likely to see growth.
Caveat: New product approvals and successful clinical trials won’t be lucrative if the FDA doesn’t approve them, however. And even with approval, the cycle time to attain that approval can be long.
Energy Stocks
Although the energy sector has faced challenges, it remains a key area for investment, especially with the global push for renewable energy.2024: Energy stocks have had a mixed performance in 2024, with some companies seeing significant gains while others have faced challenges. Here are some of the top-performing energy stocks as of December. These stocks have benefited from rising oil prices and geopolitical tensions:
- Texas Pacific Land Corp. (TPL): +205 percent
- Targa Resources (TRGP): +135 percent
- The Williams Companies (WMB): +68 percent
- ONEOK (OKE): +62 percent
- Kinder Morgan (KMI): +60 percent
Economic recovery and growth will likely come from OPEC’s production-limited supply, ongoing geopolitical tensions, and the acceleration of renewable (clean) energy growth.
Caveat: The International Energy Agency predicts that more than a third of the world’s electricity will come from renewables by 2025. This shift will reward the clean energy sector while punishing the legacy fossil fuel energy sector.
Defensive Stocks
Stocks in sectors such as utilities, health care, and consumer staples are considered stable investments during economic uncertainty.2024: Defensive stocks experienced a mixed performance in 2024, although certain sectors stand out.
- Utilities were up on increased power demand, especially with the rise of AI data centers.
- Health care stocks saw gains from low valuations and strong fundamentals going into 2024 (AbbVie Inc. and Johnson & Johnson were notable performers).
- Consumer Staples, such as Altria Group Inc., provided decent stock gains along with attractive dividends.
Caveat: Wells Fargo suggests defensive stocks might experience lower returns than cyclical sectors, the result of a resilient economy and falling interest rates.
High-Yield Bonds
These can offer attractive returns, but they come with higher risk than government bonds.2024: High-yield bonds performed well in 2024. High-yield bonds in the United States are yielding 7.2 percent and could continue to draw investors.
The ICE BofA High-Yield Index, which tracks the performance of junk bonds, show a rise of almost 10 percent this year. Strong corporate profitability along with a soft economic landing have kept default rates low.
2025: Central banks are likely to pursue further interest rate cuts in 2025, which could make high-yield bonds more attractive than government bonds. Overall, high-yield bonds are expected to perform positively according to the experts, but there are risks.
Caveat: Credit spreads are tight, reflecting strong fundamentals and investor demand for higher yields. However, spreads may widen later in the year, which could impact returns. If the economy slows, high-yield bonds will suffer as investors seek safer assets.
10-Year Treasurys
These are considered safe investments, especially in times of economic uncertainty.2024: The 10-year U.S. Treasury yield currently has a trailing 12-month average yield at 4.53 percent. The yield fluctuated as it was influenced by the Federal Reserve interest rate cuts and economic data. While the rate has been increasing these past three years, the market value of the bonds themselves has sold off (interest rates and bond prices move in opposite directions).
2025: The forecast for the 10-year U.S. Treasury yield in 2025 suggests a modest decline. Investment strategists expect the yield to average around 4.14 percent by the end of 2025, down from the current trailing 12-month yield of 4.53 percent. This largely comes from uncertainty regarding both inflation and economic growth.
Caveat: National debt is at world war levels and deficits continue. As the supply of these bonds keeps rising along with the total national debt, other nations such as China and Japan are lightening up on how much they’re willing to hold. This could have the effect of increasing yields which would proportionately decrease the principal value of the bonds.
Gold
Often seen as a hedge against inflation, gold continues to be a popular investment choice.2024: Gold prices surged by nearly 30 percent. The price started the year at around $2,073 per ounce and has gone up to about $2,636 per ounce. The main factors include increased demand from central banks, economic uncertainty, and falling interest rates.
2025: Gold prices are expected to do well next year, the result of several factors:
- Ongoing geopolitical crises and economic policies
- Persistent inflation concerns
- Expectations that central banks, particularly those in China and India, will continue buying gold as a reserve asset
- Potential interest rate cuts by the Federal Reserve
Summary
These investments reflect the current market trends and economic conditions. We have enjoyed two back-to-back good years for all investment categories. Thus, the likelihood of a third year of gains given the size of these past two years is low.That simply means that you need to be careful. It may be a good time to lighten up on those risky investments in your portfolio to preserve your principle by essentially taking some of your “winnings” off the table so that you don’t lose these.
Good luck, and Happy New Year!
The Epoch Times copyright © 2024. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.
