Several market-influencing factors are at play in 2024. These include policy easing by central banks around the world, falling commodity prices and multiple tech subindustries exiting the 2020-22 hype mania.
Other factors include the consistently growing investor/consumer focus on sustainability, slowing economic growth in China and a volatile geopolitical environment in Europe and the Middle East. These factors have put several industries on a path to recovery, while others on a long-term decline, yet others still in uncharted waters.
The fed cut rates in September by 50 basis points, which was welcomed by Wall Street as a positive signal towards a much anticipated soft landing. Following the cut, the broad market jumped 1.7%, on average, in one of its best days in the year, surpassing its last all-time high in July.
Some analysts, like Rob Rowe, expect the Fed to cut rates by at-least 25 basis points at each meeting through the rest of the year, further boosting investor confidence. The policy easing is expected to boost industries struggling due to a challenging borrowing environment.
However, some industries are likely to keep struggling due to their dependence on commodity markets. These industries are likely to suffer from overcapacity and weak demand. Commodity prices are sensitive to growth in China, whose economy grew 5.2% in 2023. Adjusted for low activity in 2022 due to lockdowns in the country, the 2023 growth was actually slow, and it is expected to slow further to 4.8% in 2024 and 4.5% in 2025, based on IMF forecasts.
On the other hand, industries that have a negative impact on the environment are on a long-term decline in their core business. This is leading to growing investments by the companies in these industries in recycling, carbon-capture technologies and renewable energy.
Best-Performing Industries in 2024
A challenging borrowing environment hasn’t stopped some industries from posting high gains in 2024. Two of the prominent ones include Semiconductors and Precious Metals. Based on the ETFs exposed to the industries, they’ve gained 45% and 37% YTD, respectively.
The demand for semiconductors is mostly driven by growth in AI, which, unlike many tech subindustries, is the only one that survived the 2020-22 hype mania. The industry posted trailing-12 month gains of 54%, based on a Roundhill Investments ETF we tracked exposed to companies at the bleeding edge of AI research in both hardware and software.
On the other hand, precious metals have outperformed the broader market so far owing to fiscal instability, geopolitical volatility and de-dollarization, even as the luxury market suffers onslaught.
Speaking of which, let’s now move to the list of 10 Worst Performing Industries in 2024.
Also Read Top 20 Fastest-Growing Industries in the World in the Next 5 Years and 16 Most Profitable Industries in the US in 2024.
A close-up view of a chart tracking the performance of the common stocks of a public company.
Methodology
For our list of the worst-performing industries in 2024, we ranked them on the basis of YTD returns of ETFs and in some cases, of stock indices exposed to the respective industries, as of October 25.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10. Timber and Forestry Industry
iShares Global Timber and Forestry ETF (NASDAQ:WOOD): -0.44%
Timber demand is heavily linked to housing, paper manufacturing, and packaging. Housing demand has been sluggish due to high mortgage rates, leading to a negative impact on the Timber industry. The Global Timber and Forestry ETF (NASDAQ:WOOD) is down 0.44% year to date.
However, with a 50-basis-points rate cut in September, with more rate cuts to come, mortgage rates are expected to follow the trend, leading to increased demand.
Further, the paper and packaging market had a bad year in 2023, as online retail fell back to pre-pandemic levels. The paper and packaging industry is still on its path to normalization in 2024 and isn’t quite there yet. According to data from the Demica Sales Value Index, the sales decline in the paper and packaging industry is slowing down, with a 12% decline in Q2, 2024, down by 5% in the prior quarter.
However, the steady growth in online retail coupled with the demand for plastic alternatives are two factors that are expected to keep demand for paper packaging strong in the coming years.
9. Food Producers
iShares MSCI Agriculture Producers ETF (NYSE:VEGI): -2.43%
AgriBusinesses have been plagued with declining profits. The industry has been dealing with the issue of high input costs for a long time, even during 2021-2022 when profitability had dramatically increased in the wake of rising commodity prices. The Russia-Ukraine war was a key factor in the grain supply constraint that led to prices shooting up.
Based on USDA’s revised projections in September, Net farm income is projected to fall by 6.8% in 2024 on an inflation-adjusted year-over-year basis. The decline was significantly steeper from 2022 to 2023, at 19.5%.
USDA attributed the moderate decline in 2024 relative to previous years to improved performance in the livestock market, in general, coupled with a slight projected decline in total input costs, which remain high when adjusted for inflation. Moreover, labor cost, a core input-cost driver in the farming industry, is expected to continue the pressure, with farmers paying the highest cost for labor in dollar terms.
The receipts from livestock are expected to rise 7.1% in 2024, driven by stronger-than-expected livestock prices while cash receipts for crops are expected to post a 10% decline. Direct government payouts are also expected to decline by 15%, which, historically, have proven to be a safety net for farming businesses.
In the EU markets, farming is showing signs of stability after steep declines in the previous months, with normalizing food inflation and declining input costs on a month-over-month basis. The outlook is improving but still has a high degree of uncertainty according to the EU.