2 Best ETFs to Buy for 2024, Based on Analysts' Forecasts for U.S. Stocks

Christmas came early for investors this week when the Fed signaled a dovish pivot for 2024, predicting a cumulative rate cut of 75 basis points - which led to an early "Santa Claus rally" in markets. The Dow Jones Industrial Average ($DOWI) hit a new record high, while the S&P 500 Index ($SPX) and Nasdaq Composite ($NASX) hit their highest levels of the year.

While these leading equity indices have delivered double-digit returns in 2023, analysts have tepid expectations for markets heading into 2024, and most see the S&P 500 delivering only low single-digit returns - and some, like Morgan Stanley, predict a negative year for the world’s most popular index.

Global Economic Growth Expected to Fall in 2024

There are a couple of themes that could play out in 2024. To start, the economic forecast is not particularly rosy, as most leading agencies are predicting global economic growth to be lower than it was in 2023. Also, with the U.S. central bank signaling its own long-awaited pivot to rate cuts, other central banks might follow suit – something similar to what we saw in 2022, when the Fed’s aggressive rate hikes played a part in other central banks’ policy decisions.

Finally, after the stellar rally in 2023, U.S. tech stocks might take a breather, and might not deliver the kind of returns in 2024 that we saw this year. Given these assumptions, I believe the VanEck Gold Miners ETF (GDX) and KraneShares CSI China Internet ETF (KWEB) are two ETFs worth adding for 2024.

Gold Mining ETFs Could Outperform in 2024

Earlier this month, gold prices hit new record highs, with the most active futures contract (GCG24) topping $2,100 per ounce for the first time. Notably, gold prices hit their previous all-time high in August 2020 and have since looked weak. As the risk-off sentiment faded in 2021, gold also lost its sheen. From there, the Fed’s relentless rate hikes – which, in general, are negative for non-interest generating assets like gold and silver – did not help matters, either.

Meanwhile, even though gold has hit record highs, many gold mining stocks are still considerably below their all-time highs. I believe 2024 could be a good year for gold, as a likely combination of falling interest rates, continued geopolitical tensions, slowing global growth, and a weaker dollar could push the precious metal higher.

Gold stocks are typically a leveraged bet on gold, and tend to rise (and fall) more than gold prices. The VanEck Gold Miners ETF is among the best ETFs to play the expected rise in gold prices, as well as the catchup trade in gold miners. The ETF has total assets of around $13 billion, and has a net annual expense ratio of 0.51%. It tracks the NYSE Arca Gold Miners Index, and is up 9% for the year so far.

Brokerages Are Bullish on Chinese Stocks in 2024

Investors in Chinese stocks – and by extension, Chinese ETFs - are likely to be a disappointed group in 2023. While U.S. stocks are up in the double digits, their Chinese counterparts have not only fallen - but earlier this month, China's blue-chip CSI300 index hit its lowest level in three years. Leading Chinese stocks like Alibaba (BABA) and JD.com (JD) have sold off this year amid a confluence of macroeconomic weakness and company-specific issues.

Chinese stocks are among the worst-performing globally in 2023, and are in the red as the country’s economic rebound proved to be shallower than what most economists expected. After yet another disappointing year amid the real estate crisis, many brokerages see Chinese stocks as an attractive asset class for 2024. For instance, Goldman Sachs and Morgan Stanley both forecast Chinese stocks to deliver double-digit returns in 2024. Invesco is also “overweight” on Chinese stocks in its Asia portfolio, while Jefferies is “tactically positive" on the country.

That said, not all market participants are bullish on China, and Chinese stocks are “uninvestable” for many global fund managers after the tech crackdown of 2021. These include Cathie Wood of ARK Invest, who has been doubling down on fintech companies SoFi (SOFI) and Robinhood (HOOD) in recent weeks.

KWEB Looks Like a Good ETF to Buy for 2024

While China is witnessing a structural slowdown and there appear to be no new growth drivers for the world’s second-largest economy, I believe Chinese stocks look too cheap to ignore at these prices. The KraneShares CSI China Internet ETF looks like a good way to play the Chinese market after having fallen almost 9% in 2023. The ETF has assets worth $5.5 billion, while the annual fund operating expense is 0.69%.

Its biggest holding is Tencent (TCEHY), followed by Alibaba and PDD Holdings (PDD) - the parent company of Temu, which along with rival Shein, has become quite popular among discount shoppers in the U.S.

To sum it up, with most brokerages predicting tepid returns from U.S. stocks in 2024, adding exposure to a gold mining ETF and a China ETF might provide much-needed diversification to many portfolios, along with the possibility of higher returns.