The S&P/ASX 200 ended last year better than it had started due to the lagged effect of monetary policy and the government stimulus bill for consumers in 2022 whose effects continued to linger in 2023. In this article, we look at the performance of the ASX in 2023, forecast 2024 outcomes, and key sectors to watch in 2024. 

How Did The ASX Perform In 2023?

As of mid-December 2023, the S&P/ASX 200 stood at 7257.80 points after opening the year at 7046.30. That is an increase of 3% for the year while the ASX200 rose 3.5% over the past three months and 11.43% in the last six months of ASX200 data. This was driven, in part, by the resilience of the Australian economy, which accelerated by 1.8% in 2023 and is forecast to reach 1.4% in 2024. 

ASX Market Forecast 2024

However, there is reason to be optimistic about the rest of 2024, with falling inflation and interest rates that will likely stay put or be cut in the near term. This is enough reason to be bullish even as there is a risk of inflation picking up again. So from this viewpoint, earnings will likely be resilient, supported by company balance sheets that can perform well outside economic cycles with the prospects for better bottom lines. 

Top 4 ASX Sectors to Watch in 2024

1. Artificial Intelligence and Technology

AI will create unparalleled opportunities for investors, unlashing productivity and improving processes for industry and businesses. While several companies will have stories linked to gains in productivity, only those with a competitive edge will retain effectiveness and unlock the advantage of artificial intelligence, supporting strong business expansion, contingent on execution. He cites financial advisers on the wealth platform Hub24 as a potential opportunity that uses AI to reduce inefficiency in the workflow of financial advisors. Pexa Group is another stock to watch, as it provides digital infrastructure for online property settlements with the potential to see exceptional margins and profits. 

2. Healthcare

The healthcare sector is well positioned for 2024 as the sector looks incredibly cheap in comparison to the similar growth peers in the tech sector, for example.  The divergence in terms of valuation is quite stark, which is why some expect that money will be flowing into the healthcare sector. For example, CSL - biotech leader and vaccine manufacturer - will do well even as Cochlear has been a long-term winner and is heading back over $300. 

3. Retail

On the consumer side, different companies demonstrate unique offerings in different cycles For example, companies such as JB Hi Fi in the retail sector continue to execute well and grow their business. It makes this sector quite attractive even as inflation will slow in 2024 some more, supporting domestic demand. This presents a potential upside for retail stocks and the sector that will likely benefit from higher consumer disposable incomes. Meanwhile, Qantas - in leisure - could bounce back and suppliers for auto parts like Bapcor could equally outperform in the near term especially as EVs continue to rise among new consumers. 

4. Insurance

AUB group is one of the top companies for 2024 in the insurance market that will likely outperform as climate and market risks persist. The Group has solid cash flows and exclusive wording and pricing to support claims as well as software to advance its operations effectively. Its business model equally gives it a 10% stake in the brokers in its network, providing a durable competitive advantage. 

In 2024, interest rates will likely be cut as inflation eases back, somewhat. This will support demand for a range of sectors, while external risks will boost insurance somewhat. As the AI revolution takes hold among consumers and within companies, tech stocks will likely perform well, but this is contingent on how well they can create value by leveraging modern AI-related technologies.