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.
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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.
8. Mortgage REITs
iShares Mortgage Real Estate (REM): -3.52%
Mortgage REIT industry is the one industry in the broader real estate segment of the US that has been hit the hardest by high interest rates. That is because other than investor capital, borrowing is what Mortgage REITs rely heavily on to buy mortgage-backed securities. The Mortgage Real Estate ETF (REM) by Blackrock is down 3.5% YTD.
However, with a 50 basis-points rate cut in September and more rate cuts to come, Mortgage REITs industry is expected to get the much-needed boost.
7. Luxury
S&P Global Luxury Index: -3.88%
The global luxury market has been underperforming the broader market in 2024 owing to factors, some of which are short-term while others are more long-term. Several luxury companies like LVMH, Burberry, Kering and Lanvin saw double-digit drops in various growth metrics in the start of the year.
The major setback for the industry has been macroeconomic factors like the slowdown of economic growth in China, which accounts for 35% of global luxury consumption, according to research by Bain & Company. The World Bank projects further decline in the Chinese economy’s growth in 2025 despite a temporary boost resulting from recent monetary stimulus measures.
Further, the report notes that the post-pandemic consumer sentiment seems to be shifting from tangible goods to experiences.
Another report by HSBC Global Research attributes the luxury spending decline in major markets like the US and China to the luxury industry’s woes. The report also says that European customers are adopting a ‘wait and see’ approach because many brands had adopted a ‘greedflation’ approach after the pandemic.
The report projected a revised growth rate of 2.8% for the luxury industry for the year 2024, down from 5.5% in the previous forecast, and called it the sixth worst year for the industry in the past 20-year period. However, they see the industry return to single high digits in early 2025, expecting a strong rebound.
6. Oil & Gas
Overall: -4%
iShares U.S Oil & Gas Exploration & Production ETF -0.98%
iShares Oil & Gas Exploration & Production ETF +4.3%
SPDR Oil & Gas Equipment and Services ETF (NYSE:XES): -7%
Several subindustries in the oil & gas industry had negative YTD returns, with natural gas getting hit the hardest. The Ultra Bloomberg Natural Gas Index Fund (NYSE:BOIL) was down 66.7% year-to-date. The US oil & gas did worse than the global industry, underperforming the latter by 5.28% based on the performance of Blackrock’s U.S Oil & Gas Exploration & Production ETF versus its global Oil & Gas Exploration & Production ETF.
The oil and gas equipment and services industry naturally followed, with the US-exposed SPDR Oil & Gas Equipment & Services ETF (NYSE:XES) falling 7% year-to-date. This is based on the ETFs exposed to these industries. The natural gas sector has experienced a more pronounced downturn in 2023 and so far in 2024 compared to other segments of the oil and gas industry. The core factor is dramatically declined price caused by global oversupply, mainly because of US’s high production levels.
5. Mining and Metals (Excluding Precious Metals)
iShares MSCI Global Metals and Mining Producers ETF (PICK): -5.62%
The mining and metals industry (excluding gold and silver) is in rough waters, with MSCI Global Metals and Mining Producers ETF (PICK) down by 5.6% YTD. PwC’s Mine 2024: 21st edition report shows the top 40 mining companies had an overall revenue and net income decline of 7% and 44%, respectively, in 2023, even as they increased production. This was on the back of falling commodity prices, softening demand in advanced economies and China and increasing operating costs. These trends have persisted so far in 2024 and are expected to continue.
The operational costs are increasing primarily because of fuel and power costs, in addition to the environmental regulations worldwide because of the mining industry’s environmental impact.
Long term, the industry’s challenge is urban mining. Given the sustainability initiatives around the world and consumers’ increasing awareness of their consumption’s impact on the environment, the future of commodities appears to be circular. In this regard, mining companies are adapting their business models to recycling, with a recent example being Rio’s 2023 purchase of a 50% stake in Matalco Inc, an aluminum recycler.
In the wake of interest rate policy easing in the US and other countries, the major global engines of growth are expected to increase demands for metals like copper, aluminum, and iron, among others.
4. Batteries/Energy Storage
iShares Energy Storage & Materials ETF (NASDAQ:IBAT): -6.53%
The batteries/energy storage industry has been caught off-guard by a growth slowdown in the EV industry after rapid growth, resulting in oversupply issues in the battery industry. The Energy Storage & Materials ETF (NASDAQ:IBAT) being down 6.53% year-to-date is indicative of the situation in the industry.
BloombergNEF notes that sales of Electric Vehicles (EVs) and Plug-In Hybrid Vehicles (PHVs) grew by over 100% in 2021, 62% in 2022, and 31% in 2023.
This, combined with upstream expansion and destocking by cathode producers, resulted in sluggish demand for batteries in 2023. These pressures were combined with upstream expansion, destocking by cathode producers, and broader commodity prices’ decline as well.
The global investment in battery technology is expected to post a decline this year for the first time since 2020, according to Rystad Energy Research. Capital inflow in the industry in 2024 is being deterred by weak market sentiment due to a momentum drop in EV sales, and oversupply, resulting in low prices causing downward pressure in margins.
3. Coal
Range Global Coal Index ETF (NYSE:COAL): -11.06%
The coal industry hasn’t yet seen the worst for itself. Demand for the most polluting fossil fuel is expected to keep declining in advanced economies for the long term as the world moves towards climate-friendly sources of energy.
Coal consumption in the US and EU declined by 17% and 23%, respectively in 2023, representing the most significant annual decline of the century, as put by the IEA. Particularly in the EU, coal is expected to decline by roughly the same magnitude in 2024. The Range Global Coal Index ETF (NYSE:COAL) is down 11.06% year-to-date.
Overall, coal consumption is up, as developing countries still rely majorly on the cheapest fossil fuel to power their economies. Global coal consumption increased by 2.6% YoY in 2023, driven primarily by growth in China and India.
The aggressive adoption of solar and wind around the world at competitive pricing, coupled with growing hydropower recovery in China, the largest coal consumer, is expected to put pressure on the coal industry, however, surging demand for electricity is expected to offset these pressures. This suggests that global coal equity’s underperformance in 2024 is largely a result of long-term prospects for the industry.
Companies in the coal industry are adapting to a changing world by diversifying their energy assets and investing in renewable energy, to investing in carbon capture technologies.
2. EVs/Future Transportation
iShares Self-Driving EV and Tech ETF: -14.6%
As we noted earlier, the EV/Future Transportation industry has been facing strong headwinds, with the growth slowing down year over year. The Self-Driving EV and Tech ETF is down 14.6% year-to-date.
Fast Markets projects that the EV industry will grow 23% in 2024, which according to them, is a decline of 13% from the year prior. The year 2023-2024 saw scaling back of production projections by several major automakers like GM and Ford.
The period between 2020 and 2022 saw a lot of hype for various technologies, driven primarily by low interest rates, pandemic-driven cultural shift towards digitialization, and major developments in AI, blockchain and 5G technologies. The EV industry was no exception to accelerated tech adoption and hype.
The industry still expects the future of automobiles to be electric, albeit the growth to that future would be slower than anticipated in the previous years. There are several reasons for the hype die-down, with the first and foremost being the lack of adequate fast-charging infrastructure, capital cost issues due to lower EV resale values, and competition from Hybrids and Plug-In Hybrids.
However, oversupply issues in the battery industry could likely prove to be a tailwind for the EV industry, resulting in lower production costs and higher sales volume. As of now, batteries are 25-35% of the cost in EV manufacturing, with a typical EV costing nearly 33% more than an ICE vehicle in the US and EU. The time horizon for EVs becoming as affordable as ICE vehicles due to battery oversupply alone is around the end of the decade according to research by International Council for Clean Transportation.
As far as self-driving technologies go, they too were the beneficiary of the techno-optimism of the 2020-22 we talked about and they’ve been among the victims of the hype die-down as well. A report by F-Prime Capital showed capital pouring into the autonomous-driving industry declined by close to 60% in 2022. The same year saw Argo AI, a prominent autonomous-driving company disbanded due to a Q3, 2022 net loss of nearly a billion dollars.
However, Ford established a new division, called Latitude AI, for the same purpose and redirected Argo AI resources to the newly found division. This, of course, does not mean the industry is failing, just normalizing, with major players like Nvidia (NASDAQ:NVDA) and Tesla (NASDAQ:TSLA), among others, continuing to advance the industry. The primary challenge with full-scale self-driving is hundreds of millions of road scenarios, with a long tail of extreme edge cases with high stakes that demand extreme model accuracy for autonomous driving to be truly viable. This is asking for a lot of data and a lot of computing power. TSLA already scraps data from its cars on the road, but in principle, it’s challenging to find useful edge cases needed to improve model performance from all the hundreds of thousands of hours of driving data.
1. Clean Energy:
iShares Global Clean Energy ETF: -15.4%
It might be surprising to see clean energy on the list. The industry had been growing rapidly, especially during the 2020-2022 period. A huge catalyst for the growth was the declining cost of solar and wind energy generation that was making them more competitive against fossil fuels. In fact, in 2020, a combined 162 GW of the renewable energy capacity added had electricity prices lower than the cheapest source of new fossil fuel capacity. This renewable capacity was 62% of the total added that year.
In addition to rapid capacity growth and cost decline, clean energy industry also enjoyed the broader techno-optimism tailwinds of 2020-22. That is, until the interest-rate hikes really started hurting the industry in the mid 2022 period. The Global Clean Energy ETF by Blackrock has shed 38% of its value since March, 2022.
As of so far in 2024, solar has suffered worse than the wind energy industry, with Invesco Solar ETF (NYSE:TAN) down 25.5%, while First Trust Global Wind Energy ETF (NYSE:FAN) is up 3.7% during the same time.
With the ongoing interest rates’ policy easing around the world, and especially in the US, the clean energy industry is expected to have a more bullish outlook in the coming years. This is in addition to its long-term positive outlook being solidified owing to decreasing costs, improving technology and global carbon goals. Straits Research projects a growth rate of 9.47% for the industry during the period 2024-2032.
While we acknowledge the potential of clean energy as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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