BEST INVESTMENT 2024 | HOW TO CHOOSE WHERE TO INVEST

Where to invest in 2023

To achieve the best investment in 2024, you should consider several factors that allow you to rule out numerous alternatives::

• The current scenario
• The most likely future scenarios
• The actual goal to be achieved

The best investment in 2024 should indeed take into account the unique situation in which we find ourselves, what lies on the horizon in both 2024 and the coming years, and what targets can be concretely reached at the moment.

The alternatives on where to invest in 2024 considered in this article are the most popular:

• Investments in the real economy (including private equity funds)
• Stocks and bonds (including ETFs and mixed stock, bond, and mutual funds)
• Gold and other safe-haven assets
• Bitcoin and other cryptocurrencies
• Real estate investments

The current scenario

2023 is coming to an end, and 2024 opens in an uncertain scenario characterized by three phenomena to carefully consider when choosing where to invest this year:

• Still very high inflation
• Record-high interest rates
• Elections in the United States

Economically, all of this creates deep uncertainty. Among the three phenomena, the first two are the most relevant. We are witnessing both a impoverishment of the population that has lost and continues to lose purchasing power and difficulties for businesses accessing credit due to unprecedented borrowing costs. The high interest rates are also putting states in crisis, forcing them to issue bonds (Treasury bonds) that are more expensive for the states themselves and cheaper for investors than ever before. Even working citizens face the same difficulties in financing purchases of widely consumed goods or services, durable goods (cars, appliances...), or homes, with truly prohibitive mortgages (currently over 7% in the USA, while in Europe the 6-month Euribor - to which the bank's spread is added - has exceeded the psychological threshold of 4%). According to Jerome Powell, the head of the FED, interest rates will remain high until the end of 2024, when the first rate cut is likely. Right in conjunction with the last decisive election campaign events in the USA.

These elements lead us to exclude that the best investment in 2024 can be in the real economy, as well as in stocks and bonds. The first and the second are influenced by the context of being "one step away from a crisis" to which central banks are pushing economic systems to cool them down. The third, on the other hand, is pushed lower by high interest rates. Given the trend of recent months, despite the winds of crisis and the ongoing war that began following the Russian invasion of Ukraine, we can also exclude that the best investment in 2024 is in gold, which is unable to break through the $2,000 per ounce resistance, or in Bitcoin, which has found its new resistance at $30,000 and forces the investor to endure an unbearable negative volatility (measured by the Ulcer Index) for most people.

Beyond the choice of the best investment, a scenario of high interest rates has practical consequences for families, who must postpone important purchases such as a car or a home to a later time. In the USA, this has already led to pressure on rents and a decrease in sales (but not real estate prices, now considered the least volatile safe haven to weather times of crisis), favoring all those investors who rent out their property, especially to working families.

Most likely future scenarios

High interest rates are here to stay for a long time. The attempt to tame inflation has yielded and will continue to yield results below expectations. Besides the usual 3-quarter lag in transmission required for a change in interest rates to cool down the real economy, this effect is mitigated by record employment. While families have been affected by inflation and have difficulty accessing credit, they may have an extra member who has found a job and brings home an additional salary, so the family's economic power has still been maintained or even increased. Alternatively, the number of working members in the household remains the same, but at least one of them has seen an increase in their salary due to changing jobs or receiving a generous counteroffer from their employer to stay.

The lowering of interest rates by a few points announced by Powell for the end of 2024, even if it were to be brought forward by a few months to boost the stock market and help Biden get re-elected, will not change this situation because the increases between 2022 and 2023 have been too many and too significant (and, according to some, too late).

So, in our practical example, the situation of the US real estate market, with more and more working families renting and fewer buying homes, is destined to persist for a long time.

When choosing the best investment for 2024, among possible future scenarios, the opposite dynamic should also be considered: when interest rates start to decline again, normalizing to about halfway between the current high rates and pre-Covid rates (around 2% in the United States and close to 0% in Europe). We don't know when it will happen, but sooner or later it will, and this has and will have consequences regarding where to invest. At that point, with the threat of a resumption of inflation ruled out, American families - for example - will be able to buy homes again, benefiting those who already own one at that time and can choose whether to sell it at a profit or keep it and settle for the "paper gain" due to its increasing value.

The True Goal of the Best Investment in 2024

Beyond the current and possible future scenarios, the most important thing to consider when choosing the best investment for 2024 is its goal. Beyond the classic return on investment that repays the risk, in a context like the current one, the most important aspect is that the return is sufficient to beat inflation.

This concrete goal leads us to once again rule out stocks, bonds, gold, and bitcoin as the best investment for 2024, as they are unlikely to outperform price increases in 12 months characterized by numerous uncertainties and high volatility. Returning to the practical example seen so far, in the US real estate market, the segment of properties intended to be rented to working families, with its net yields between 5% and 10% annually during 2023, allowed beating inflation, which fell below 4% during the year. Therefore, in all likelihood, this will be the best investment for 2024.

Moreover, in this case, the return on investment is twofold: in addition to the rental income (between 5% and 10% annually), properties tend to appreciate over time, offering significant capital gains at the time of sale.

Invest in income-producing properties in the US real estate market with Opisas

If you want to learn more about these high-yield investments and find out about the opportunities available at the moment, you can contact us at [email protected] to schedule an appointment.