Three Investment Themes for 2024 and Beyond

Elections, geopolitical risks and rate cuts are driving markets in the short term. But there are three trends that could provide long-term investment opportunities.

----- Transcript -----

Welcome to Thoughts on the Market. I'm Michael Zezas, Global Head of Fixed Income and Thematic Research for Morgan Stanley. Along with my colleagues, bringing you a variety of perspectives, I'll be talking about three key investment themes for 2024. It's Wednesday, January 17th at 10 a.m. in New York.

Markets will have plenty of potential near-term catalysts to contend with in 2024. There's elections, geopolitical risks as tensions rise with regional conflicts in Europe and the Middle East, and key debates about the timing and pace of central bank rate cuts. We'll be working hard to understand those debates, which will influence how markets perform this year.

But what if you're thinking a bit longer term? If that's you, we've got you covered. As it's become our annual tradition, we’re rolling out three secular themes that Morgan Stanley research will be focused on developing collaborative, in-depth research for, in an effort to identify ways for investors to create potential alpha in their portfolio for many years to come.

The first theme is our newest one, longevity. It's the idea that recent breakthroughs in health care could accelerate the trend toward longer and higher quality human lives. To that end, my research colleagues have been focused on the potential impacts of innovations that include GLP-1 drugs and smart chemo. Further, there's reason to believe similar breakthroughs are on the horizon given the promise of AI assisted pharmaceutical development. And when people lead longer lives, you'd expect their economic behavior to change. So there's potential investment implications not just for the companies developing health care solutions, but also for consumer companies, as our team expects that, for example, people may consume 20 to 30% less calories on a daily basis. And even asset managers are impacted, as people start to manage their investments differently, in line with financing a longer life span. In short, there's great value in understanding the ripple effects into the broader investment world.

The second theme is a carryover from last year, the ongoing attempts to decarbonize the world and transition to clean energy. Recent policies like the Inflation Reduction Act in the US include substantial subsidies for clean energy development. And so we think it's clear that governments and companies will continue to push in this direction. The result may be a tripling of renewable energy capacity by 2030. And while this is happening, climate change is still asserting itself and investment should pick up in physical capital to protect against the impact. So all these efforts put in motion substantial amounts of capital, meaning investors need to be aware of the sectors which will be crimped by new costs and others that will see the benefits of that spend, such as clean energy.

Our third theme is also a carryover, the development of AI. In 2023, companies we deemed AI enablers, or ones who were actively developing and seeking to deploy that technology, gained about $6 trillion in stock market value. In 2024, we think we'll be able to start seeing how much of that is hype and how much of that is reality, with enduring impacts that can create long term value for investors. We expect clear use cases and impacts to productivity and company's bottom lines to come more into focus and plan active research to that end in the financials, health care, semiconductor, internet and software sectors, just to name a few. So stay tuned. We think these debates could define asset performance for many years to come. And so we're dedicated to learning as much as we can on them this year and passing on the lessons and market insights to you.

Thanks for listening. If you enjoy the show, please share Thoughts on the Market with a friend or colleague, or leave us a review on Apple Podcasts. It helps more people find the show.