IN FOCUS6-8 min read

2024 equity market themes and trends

Consumer spending, tech and healthcare will all remain in focus in 2024



Dominic Liversedge
Portfolio Director
Graham Harrington
Portfolio Director

As the US heads towards elections, investors may have strong convictions about which candidate or party will steer the country in the right direction. Historically, however, the party that prevails has had little impact on long-term market returns. Since 1936, the 10-year annualised return of US stocks (as measured by the S&P 500 Index) made at the start of an election year was 11.2% when a Democrat won and 10.5% in years a Republican prevailed, according to data from Standard & Poor’s. So, we prefer to focus on longer-term trends rather than political noise. Here are some of the key investment themes that we are focused on - and that have long-term growth potential beyond any election cycle.

Real wages are finally rising again

Consumer demand is finding support as the cost-of-living crisis eases, while tight labour markets keep wages rising above inflation. Current trends in both inflation and employment suggest that consumer spending could continue to support corporate earnings and carry markets higher.

US real average hourly earnings

Annual percentage change

equity chart 9

Source: Bloomberg, 3 January 2024.

Is made in America making a comeback?

A tidal wave of cash is heading towards American industry, with the US government committing $1.4 trillion for capital projects over the coming years. This will translate into revenue and earnings growth for companies with the capacity and flexibility to undertake the huge projects involved, including upgrading US roads, bridges and railroads as well as renewable energy and technology infrastructure.

equity chart 8

Source: Cazenove Capital.

This level of investment could potentially transform many industrial firms from cyclical companies with volatile earnings into growth businesses. Within our portfolios, industrial and capital equipment makers have been reporting strong underlying demand across key US end markets. And, as well as reshaping the US manufacturing and energy industries, the surge in investment could also see capital expenditures rise from relatively low levels as a percentage of US GDP.

Capital expenditures as a percentage of gross domestic product (%)

equity chart 3

Source: St. Louis Federal Reserve. Data from January 1, 1980 to June 30, 2023. Capital expenditures include private non-residential equipment and structures and excludes energy.

The Fab Five

The five largest US stocks by market capitalisation currently account for approximately 15% of the MSCI All Country World index.  That’s equivalent to the total stock market capitalisation of Japan, China, France and Germany put together.  However, this doesn’t necessarily mean they are overvalued. These companies now have very strong competitive positions and are benefiting from powerful tailwinds from AI. We think they may be able to maintain their momentum. 

Sales growth for Microsoft, Apple, Alphabet, Nvidia and Amazon has averaged 14% per annum over the last 4 years while profits have grown at 21% pa. Looking forward, sales and profits for the “Fab Five” are expected to grow at 12% and 16% pa over the next 2 years1.  This makes the rest of the market look rather pedestrian, at less than half the rate of growth. 

What about valuation?  The top five stocks are in aggregate valued at just under 30x earnings, which is a small discount to the average of the last 5 years. This does not look excessive in the context of their expanding profit margins and earnings growth.

Artificial Intelligence: separating the hype from the reality

We think that the current technology cycle has important differences from previous ones and could help the largest technology firms maintain their position at the forefront of innovation.

The adoption of artificial intelligence (“AI”) could be much quicker than other new technologies. Take cloud computing as a comparison. It started to take off in 2008 and more than a decade later it is estimated that roughly only 30% of corporate workloads are in the cloud. This is in large part because replacing existing architecture is a complex and time-consuming process. AI is very different. Rather than replacing existing systems or processes, it can in many cases simply be added to them. And if, for example, a software vendor adds AI functionality to an existing product, it could be deployed in a matter of days or weeks — not years. 

Large tech companies have many first-mover advantages:  they have huge amounts of proprietary data, abundant capital and access to engineering talent. Many have huge user bases to sell AI products and services to. And some of them also own the very expensive cloud computing infrastructure necessary for training AI models.

Companies that thoughtfully implement AI by making changes in areas such as research and development, product design and logistics could see improvements in their margins, product development cycles and customer satisfaction. But the beneficiaries of AI’s ascent aren’t only to be found in the tech world. AI-driven applications are spawning innovation across many industries. However, it will not be a one-way street for the tech giants. AI may change consumer engagement with internet search for example, which is still a huge profit centre for Google.

Our expectation is that we will see considerable innovation in the years to come. It's still early days, but we anticipate consumer tech giants will strive to develop powerful virtual assistant tools that could book all your travel, do your expenses and maintain your medical data, among a range of other possible functionalities.

It is clear that AI is going to continue to have a huge impact on society. The challenge for investors, however, will be to separate the hype from reality amid the expected exponential growth of AI systems over the next decade.

Innovation is leading to a golden age of healthcare

The healthcare sector is also in the midst of an innovation wave. Pharmaceutical companies have invested heavily in drug discovery in recent years and, as a result, they now have deep pipelines of pioneering treatments for some of the world’s biggest health issues. Eli Lilly and Novo Nordisk have enjoyed huge success with obesity treatments that have the potential to reduce body weight by as much as 25%. It is less well known that AstraZeneca has become a leader in oncology, with advanced therapies for lung, bladder and breast cancer.

equity chart 6

Source: Food and Drug Administration. As of 31 December 2021.

The potential for obesity treatments remains significant. Estimates suggest that 37% of the world's adult population will be overweight, and 19% obese by 2030, with the latter equating to more than a billion people2. Obesity is associated with a range of medical issues (including heart disease, stroke, various forms of cancer and diabetes) that can have a significant economic impact on health care systems and society. The Centres for Disease Control and Prevention (CDC) estimates annual obesity-related medical costs in the US were nearly $173 billion as of 20193.

Obesity is a growing problem

equity chart 7

Sources: Centres for Disease Control and Prevention (CDC), World Health Organization (WHO), World Obesity Federation. 1975–2015 data is from WHO. 2020 US data from CDC. Projections from the World Obesity Federation as of March 2023. Figures represent latest estimates available, as of November 16, 2023.

Not every theme will make you money in the short term

With huge investment needed in green energy, renewable energy has been an obvious theme for long-term investors. However, performance has been challenging over the past couple of years as companies have battled rising costs and volatile margins. In many of our portfolios, we own the wind turbine manufacturer Vestas, either directly or through funds. The company has been delivering on orders that were booked months or years earlier when interest rates were significantly lower. Recent results show how subsequent cost increases have eroded profitability. In the final quarter of 2023, the company reported record orders that exceeded market expectations. The share price enjoyed a welcome recovery. However, the episode is a reminder that lumpy business cycles can matter more to returns than the long-term solutions a company provides.


References to specific companies in this article are for illustrative purposes only and not a recommendation to buy or sell.

1 Bloomberg, 30 January 2023.

2 Estimates are shown for illustrative purposes only. Source: Global burden of obesity in 2005 and projections to 2030, T Kelly, W Yang, C-S Chen, K Reynolds and J He, 2022.

3 As of December 2022. Source: Centers for Disease Control and Prevention.

This article is issued by Cazenove Capital which is part of the Schroders Group and a trading name of Schroder & Co. Limited, 1 London Wall Place, London EC2Y 5AU. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. 

Nothing in this document should be deemed to constitute the provision of financial, investment or other professional advice in any way. Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested.

This document may include forward-looking statements that are based upon our current opinions, expectations and projections. We undertake no obligation to update or revise any forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements.

All data contained within this document is sourced from Cazenove Capital unless otherwise stated.


Dominic Liversedge
Portfolio Director
Graham Harrington
Portfolio Director


The value of your investments and the income received from them can fall as well as rise. You may not get back the amount you invested.