Investment trust managers bullish on information technology as top performing sector in 2024

Over a quarter (26%) of respondents picked the sector, followed by Industrials with 19% and Healthcare and Energy both at 15%.

Over a five-year horizon, 44% of fund managers said Information Technology would be the top performing sector over the next five years, followed by Energy and Healthcare at 19% and 15%, respectively.

In the coming year, the UK is anticipated to outperform other regions, as indicated by almost half of the respondents (44%), with the US (15%) following in second place and Japan (11%) in third. 

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Looking ahead to the next five years, nearly a third of investment trust managers (30%) believe the UK will maintain its lead as the most attractive region, trailed by emerging markets at 19%, the US at 15%, and Europe at 11%.

In terms of asset classes, small-cap equities are expected to be top performers next year with 26% of all votes cast, followed by mid-cap equities (19%), and large-cap equities and bonds both at 11%. 

More than two-thirds (70%) of managers expressed optimism about rising global stock markets in 2024, with 15% anticipating a decline and the remainder uncertain about their outlooks. Regarding the FTSE 100, 65% predicted the index to surpass 7,500, while 35% see it falling below this level.

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In terms of economic factors, a majority of managers (78%) believe interest rates have reached their peak, contrasting with 7% who anticipate further increases, and 15% who did not respond. However, 59% of managers expect the Bank of England base rate to remain above 4% by the end of next year.

Despite a consensus (93%) among managers that inflation will decrease in the coming years, only 7% believe the Bank of England will meet its 2% target next year, while 33% suggest the target will be achieved in 2025, 41% in 2026, and 11% in 2027 or later.

When asked about the primary threat to equities over the next 12 months, 26% of respondents cited a recession. 

Meanwhile, 30% of managers viewed interest rate cuts as the most significant cause for optimism, followed by opportunities in undervalued companies (22%) and cooling inflation (15%).

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“With the rise of artificial intelligence and the fast-paced development of cloud-based systems and hardware, it is no surprise that investment company managers have tipped Information Technology to be the best performing sector of 2024 and beyond,” said AIC communications director Annabel Brodie-Smith.

“The UK is perceived to be the most attractive region in 2024 and over the next five years, and the majority of managers are bullish on stock markets. Most managers believe interest rates have peaked and inflation is reducing, though the pace of this may well be slow. 

“The continued threat of a recession remains, along with the risks associated with the war in the Middle East and the impact it may have on oil prices,” she added.