This year has started off on a turbulent note. Global markets have been cautious due to the US Federal Reserve dimming chances of a rate cut in March and rising bond yields.
Global brokerage giant Morgan Stanley offers some contrarian investment ideas as investors begin 2024 amid an uncertain market outlook, hesitant economic growth, and geopolitical unrest.
1. Momentum shifting towards the Airlines
The global brokerage house believes that business and leisure travel will continue to be strong, despite investors’ concerns that carriers won’t be able to keep up with the demand for domestic and international travel and would end up adding too many seats and routes.
“Investors are worried that airlines will add meaningful capacity growth in 2024. However, our research shows that airlines are actually trying to pare back growth expectations, which should bode well for revenues from ticket prices. Meanwhile, in Europe, investors are also worried about soft demand and the effects of capacity constraints,” mentioned the brokerage.
2. Advancements in the switch to renewable energy
In 2024, high prices—which are a result of producers protecting their profits in the face of rising interest rates—may reduce consumer demand. However, according to Morgan Stanley Research, the economics of renewable energy outweigh those of alternatives like natural gas because the impact of high rates is incorporated into the prices of renewable energy. Rates are expected to drop in the second half of the year, which might free up funds for businesses to spend in growth.
3. Copper supply chain amplified
Last year, there seemed to be less disruptions in the global copper supply chain following recent upheavals. The delayed launch of a major mine in Chile and increased output in Peru and the Democratic Republic of the Congo are the main reasons why many investors expect a return to normalcy, with projections of up to 10% growth in pre-disruption production.
Nonetheless, Morgan Stanley Research anticipates a protracted period of upheaval. A shortfall of 340 kilotonnes is expected for this year, which will affect prices by the second quarter. London prices are expected to reach a bullish objective of $9,000/ton, which is around 8% more than in 2023.
4. India’s growth cycle
The three main themes driving India’s growth over the next ten years are digitalization, energy change, and global offshoring. In a rewired economy, India is starting to look like a desirable destination for electronics production as global supply chains change. Investors are nevertheless skeptical that India will surpass China for the fourth year in a row, despite this potential.
Morgan Stanley Research, in contrast to investor cynicism, is bullish on India’s growth prospects, predicting GDP growth of over 12 percent in 2024—more than twice that of China. India’s businesses are well-positioned to generate profits growth because to this promising future. The market’s belief that Indian stocks will peak in 2024 is contested by Ridham Desai, Chief Equity Strategist for Morgan Stanley in India, who claims that a profit cycle is just halfway over.
5. Obesity Drugs
Over the past two years, there has been a global boom in the use of obesity medicines to treat linked health concerns and manage weight. Although investors recognize that changing consumer behavior could pose a risk to the food business, many are skeptical about the true effects of obesity medications. Morgan Stanley Research continues to anticipate that these medications will have a substantial impact on a number of food-related industries. As customers choose for healthier options, they predict a decline in the market for unhealthy products such baked goods, confections, alcohol, and soft beverages.
