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Equity Investment: Sectors to Watch in 2024
Market Outlook

Equity Investment: Sectors to Watch in 2024

Amidst a market inflection, Schroders’ Alex Tedder highlights the need for equity investors to pivot towards long-term structural themes.
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2 JAN, 2024

By Schroders

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Alex Tedder, Head of Global Equities at Schroders

We find ourselves at a turning point for the markets, at the beginning of a new era for investment with implications for investors. Specifically, equity investors need to shift their focus, and one of their new objectives should be to consider long-term structural themes marked by what we have called the 3Ds: decarbonization, demographics, and deglobalization.

In this regard, the arguments in favor of the decarbonization theme are numerous. Since much of the post-pandemic pressure on costs and excess capacity in some areas of the renewable energy universe has already been overcome, now seems like an opportune moment for investors to consider investing in the energy transition theme. Thus, it appears clear that technology is key to addressing many of the structural challenges we currently face. Solar energy and carbon capture are two fundamental pillars of the energy transition theme.

Similarly, solutions to the demographic challenge largely involve medical advances, automation, and artificial intelligence (AI). AI has captivated investors' attention, and there is no doubt that it carries a significant risk of generating too many expectations. However, the logic behind the market excitement is undeniable. Automation is a trend that has been with us for a long time and has rapidly expanded from some industrial processes to the entire services sector. Generative AI, based on language models, takes the stakes much higher.

There are more than 1 billion knowledge workers worldwide, those who apply theoretical or analytical knowledge to perform specific tasks. The increase, reinforcement, and perhaps replacement of some of this work will bring about enormous changes and create significant opportunities for investors, not only in the technology sector but in almost every area of the economy. PwC estimates the potential economic value of AI at $17 trillion per year by 2030. Compared to the current global GDP, which is around $110 trillion, this is an extraordinary figure, and immense opportunities are likely to emerge in the automation space.

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