However, each of these trends carries significant risks. Skeptics argue that the potential of AI to translate into earnings growth is uncertain. The private credit market, while growing, is filled with hidden dangers due to its lack of transparency and minimal regulatory oversight. Small-cap stocks, despite their potential for a rebound, face challenges such as weak earnings and rising debt costs, and the risk of a U.S. recession could further impact their performance.
Key takeaways:
- The AI boom is expected to be a significant investment trend in 2024, with IT spending predicted to accelerate 8% year-over-year, particularly in software spending due to AI applications. However, there are concerns about how much of AI's potential will translate into earnings growth in 2024.
- Private credit is likely to continue rising in 2024 due to higher interest rates leading banks to lend less frequently. The private credit market is expected to reach a value of $2.8 trillion by 2028. However, the lack of transparency and regulatory oversight in this market poses significant risks.
- Small-cap stocks may present an opportunity for investors in 2024, with predictions of a potential 50% surge in the Russell 2000. However, many smaller public companies still need to refinance debt at higher interest rates, and a potential increase in "zombie companies" could pose risks.
- Despite potential opportunities in AI, private credit, and small-cap stocks, the overall economic environment remains uncertain with potential risks including geopolitical tensions, the upcoming presidential election, and the possibility of a U.S. recession.