6 types of investments whose value will drop dramatically by the end of 2024

With just months to go before the presidential election, there are numerous economic issues on the minds of many investors: (still stubborn) inflation, skyrocketing interest rates, a difficult housing market, and uncertainty about when the Federal Reserve will cut interest rates—all of which can lead to difficult investment decisions.

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Sure, the stock market is currently on a winning streak: The S&P 500 has risen by 17.8 percent since the beginning of the year and the Nasdaq by 25.3 percent (both as of July 10), but whether this trend will continue remains to be seen.

Against this background, experts believe that some types of investments could collapse sharply by the end of the year.

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Investments in sectors dependent on consumer spending

Industries that rely heavily on consumer spending, such as travel and leisure, could face challenges toward the end of the year due to geopolitical tensions and unexpected global events, and as consumer purchasing power could continue to decline due to inflation, said Michael Collins, CFA, founder and CEO of WinCap Financial.

“For example, the current conflict in Israel and Gaza could create a sense of uncertainty and fear among travelers and deter them from visiting certain destinations,” he said. “In addition, travel within the United States could decline due to inflation, meaning a family trip to Disney could cost almost twice as much as it did 10 years ago.”

Real estate stocks and real estate investment trusts (REITs)

Certain types of investments are expected to experience significant declines in value through the end of 2024 due to various economic and market factors: In particular, investments in industrial equipment and data centers are expected to underperform due to persistently high interest rates, said Robert Hodgins, fund manager at Sand Hill Road Technologies Fund.

According to Hodgins, these include both real estate stocks and REITs – essentially mutual funds that buy real estate instead of stocks.

“Real estate prices have risen to unsustainable levels in some areas,” Hodgins said. “Rising interest rates or an economic slowdown could cause real estate values ​​in these markets to decline.”

Non-AI technology stocks

Hodgins noted that while AI-focused companies are thriving, other large-cap technology stocks may face challenges due to high valuations and economic uncertainty.

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“Some technology stocks have reached unsustainable valuations. If earnings fall short of expectations or there is a broader market correction, these stocks could suffer significant losses,” he said.

US bonds

According to Hodgins, bonds could become less attractive due to rising Treasury yields and rising interest rates, leading to a potential loss in value.

“High yield bonds are issued by companies with lower credit ratings and are therefore riskier,” Hodgins added. “Economic downturns increase the risk of default for these companies, leading to falling bond prices.”

Commercial real estate and regional banks

According to Markus Levin, co-founder of XYO Network, the commercial real estate market will not fare well as “the aftermath of Covid is still lingering and many people are not returning to their offices.”

This in turn has an impact on the banking sector.

“That’s why I think the regional banks that are heavily tied to commercial real estate are probably not going to do so well,” he said. “I think government bonds are also not going to do well because the debt is so high.”

With such high levels of debt in general, the yields on these bonds would be pushed up and, conversely, the value of the bonds would be structurally pushed down, he added.

Sunand Raghupathi, co-founder of Veda, echoed this view, saying that in a world where the broader macroeconomic environment is shifting from more restrictive central bank monetary policy to a much looser one, meaning a cut in interest rates is imminent, assets in excess could perform even worse in this environment.

“Commercial real estate comes to mind, which is currently oversupplied due to the trend towards working from home,” Raghupathi said. “So I suspect we will continue to see losses in the valuation of office buildings in city centers.”

Cryptos and speculative stocks

As WinCap’s Collins noted, it’s possible that risky assets like cryptocurrencies and speculative stocks could see a decline by year-end due to market volatility and overall investor sentiment.

“This volatility is due to several factors. One factor is the fact that cryptocurrencies are decentralized and not tied to any government or central authority, which can lead to sudden changes in value due to market sentiment and speculation,” he said. “In addition, the lack of regulation and oversight in the cryptocurrency market allows for large price fluctuations without outside intervention.”

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This article originally appeared on GOBankingRates.com: 6 Types of Investments That Will Decline in Value Before the End of 2024