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Key Market Insights for 2024 Key Market Insights for 2024

In 2024, inflation, interest rates, and the presidential election will likely be on top of ETF investors’ minds. Here are four other lesser-known trends and insights — both positive and negative — to consider in 2024.

Companies Employing Pricing Power to Navigate Market Challenges

Predicting demand trends isn’t the hard part — it’s sustaining growth and profitability amidst market fluctuations. While analysts favor growth, it’s essential for companies to balance realistic revenue growth with investor expectations. Once market saturation hits, companies like Netflix (NFLX) and Tesla (TSLA) raise prices to maintain revenue growth, a concept known as pricing power. Such companies can weather fluctuating demand and pass on inflationary costs to customers, a crucial strategy in the current market environment.

Consumer staples and discretionary companies tend to have stronger pricing power, demonstrated by brands like Coca-Cola (KO), Costco (COST), Nike (NKE), and LVMH Moet Hennessy (MC FP). Investing in ETFs like the Consumer Staples Select Sector SPDR Fund (XLP) and the Tema Luxury ETF (LUX) can harness the potential of companies with robust pricing power.

Labor Concerns and Their Impact on ETFs

As labor strikes affected various industries in 2023, inflationary pressures are expected to fuel ongoing labor disputes in 2024. In industries with unions, such as manufacturing and services, companies may face disruptions in supply and increased labor costs. However, the impact on ETFs is usually moderate, as not all companies within an industry are unionized, presenting investment opportunities for companies like Honda Motor Co (7267 JP) and Tesla (TSLA) that do not have unionized labor forces.

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Diversified ETFs like the Global X Autonomous & Electric Vehicles ETF (DRIV) can provide stability, as seen in its 24% growth in 2023 compared to individual stocks like Ford and GM, which saw only approximately 5% and 7% growth, respectively.

Small-Cap Stocks: A Viable Strategy for Diversification

While large-cap equities offer a sense of security, small-cap stocks are currently undervalued and gaining strength compared to their larger counterparts. The SPDR Portfolio S&P 600 Small Cap ETF (SPSM) outperformed the SPDR S&P 500 ETF Trust (SPY) with a 15.9% growth in 4Q23 versus 11.2% growth, signaling the potential benefits of diversifying investments beyond the “Magnificent Seven” stocks.

The Evolving Landscape of Crypto ETFs

Bitcoin’s resurgence in 2024 has sparked excitement, driven in part by the potential launch of spot bitcoin ETFs and a forthcoming halving event. Beyond the anticipation of bitcoin ETFs, greater investor acceptance and a halving event in April 2024 are expected to elevate the status of cryptocurrencies and drive prices higher.

ETFs such as the Valkyrie Bitcoin Miners ETF (WGMI) and VanEck Digital Transformation ETF (DAPP) were top performers in 2023, and investors eyeing the spot bitcoin ETF launch can expect continued price increases amid growing crypto interest.