For investors, this year will have two distinct halves. The first half of calendar-year 2024 will be a grind as the market seeks clarity on the inflation/interest rate outlook and geopolitical risks and consolidates gains from fourth-quarter 2023.
The second half will deliver higher returns. By then, the market will have tailwinds from falling inflation and interest rates. Expect an uptick in deal flow in the back end of 2024 – more takeovers and Initial Public Offerings – as business confidence improves and the US Presidential election is held in November.
Now is a good time to consider sectors that have been left behind – the laggards rather than the leaders – and have potential to lift with a stronger global equities market later in 2024. And how portfolios can be tilted to provide more exposure to these themes.
Exchange Traded Funds (ETFs) are a useful tool for portfolio tilts. Investors might, for example, take some profits on funds/stocks that have rallied in the past few months and rotate into sector laggards using low-cost ETFs.
To be clear, this market – at least in the first half (possibly longer) – will be two steps forward, one step back (at best). Investors in the ETF ideas below must be prepared for volatility and potential short-term losses. No market rises in a straight line. Gains from here will be hard-won in the first half.
Here are five ETF ideas for 2024 to consider.
- Small caps
As I wrote last week, there’s a lot of hype around small-cap equities, predictably from small-cap managers eager to attract capital to their funds.
Also true is small-cap equities have underperformed large-cap Australian equities for well over a decade. Small industrials, in aggregate, have been battered. The gap between them and large-cap industrials is at GFC-like levels in 2008-09.
The SPDR S&P/ASX Small Ordinaries Fund provides exposure to the Small Ord Index – the key barometer of small-cap performance in Australia. The Small Ords measures stocks ranked 101-300 (by capitalisation).
As risk appetite rises in the second half of 2024 – and as there’s finally a rush of IPOs – conditions will improve for small companies.
Although small-caps are always a stock-picker’s market, there’s merit in seeking broad exposure to this asset class (through an ETF) after such a long period of underperformance, as part of a portfolio tilt strategy.
Chart 1: SPDR S&P/ASX Small Ordinaries Fund (ASX: SSO)

Source: Google Finance
- Value stocks
After a brief burst of outperformance in 2022 (as interest rates rose), so-called value stocks have largely underperformed growth stocks for the past 15 years. Value stocks typically trade on lower relative valuations than growth stocks.
Falling rates in the second half of 2024 should be a tailwind for 2024. But the market has already priced that in, particularly for large-cap US tech stocks.
Watch more capital return to value stocks that have been left behind in the rally as more capital searches for undervalued stocks.
The Vanguard Global Value Equity Active ETF (Managed Fund) provides exposure to large-cap US stocks with value characteristics (such as lower Price Earnings or Price-to-Book ratios).
With big tech stocks dominating the S&P 500 last year, it’s worth looking at the many other stocks in that index – particularly value stocks that lagged.
Chart 2: Vanguard Global Value Equity Active ETF (Managed Fund) (ASX: VVLU)

Source: Market Watch
- Emerging markets
Emerging-market equities should have a better year as stronger global growth and rising risk appetite in the second half of 2024 favour this asset class.
Higher growth should underpin higher commodity prices, which in turn will support emerging markets that are commodity producers.
Also, as US interest rates are cut earlier than those in other developed markets this year, the Greenback should lose a little steam. That’s good for developing nations with lots of debt priced in US dollars.
Longer term, emerging markets provide exposure to one of the world’s great megatrends – the boom in the middle class in Asia and other emerging markets.
Emerging-market valuations appeal. The MSCI Emerging Markets Index last year traded at one of its largest discounts in history to the MSCI World Index. Paying more attention to assets that are vastly out of favour can pay off, but emerging markets have high risks.
The iShares MSCI Emerging Markets ETF is the largest ETF for emerging markets. It provides exposure to around 800 large and mid-sized companies through a single fund. The index is skewed towards large companies in more advanced emerging economies.
Chart 3. iShares MSCI Emerging Markets ETF (IEM)

Source: Google Finance
- Gold equities
As the US-dollar gold bullion price flirts with its record high, gold equities have underperformed. I usually prefer gold exposure for exposure to the gold sector (to eliminate company and equity-market risk). But the underperformance of gold equities – when gold bullion is so strong – warrants consideration.
Gold equities have collectively underperformed due to cost blowouts, production issues and overpaying for acquisitions. The market seems more interested in getting exposure to the metal rather than the firms that produce it.
That could change in the second half of 2024 as global growth improves, risk appetite rises, and large-cap gold stocks look relatively undervalued.
The BetaShares Global Gold Miners ETF – Currency Hedged (MNRS) tracks an index that comprises 44 of the world’s largest gold-mining companies (excluding those in Australia) and is hedged for currency movements. Most of those companies are in Canada and the US.
As such, MNRS is a convenient tool for exposure to the world’s large gold companies, several of which look undervalued after lagging the gold-price rally.
Chart 4. BetaShares Global Gold Miners ETF – Currency Hedged (MNRS)
Source: Market Watch
- Biotech
I was wrong last year on biotech, believing the sector would rally after a few years of terrible underperformance. That call was probably too early rather incorrect, so I’ll stick with it for now. Note the gains in biotech indices since early November.
Rising risk appetite in the second half of 2024 could spark a rush of biotech mergers and acquisitions activity, and IPOs. Plenty of big biotechs are sitting on piles of cash to acquire smaller biotechs with promising drug candidates.
An increase in drug approvals by the US Food and Drug Administration last year and better news on the regulatory front could underpin a biotech recovery.
The biotech sector can be volatile, meaning this idea suits experienced, risk-tolerant investors. But there’s a push to put more focus on biotech this year, through an ETF, such as the Global X S&P Biotech ETF (CURE).
CURE provides exposure to the 121 biotech companies listed in the US. By sub-sector, most of these stocks are in biotechnology rather than pharmaceuticals or healthcare products.
CURE has an annualised return of -10.6% over three years to end-December 2023. That compares to 14.1% by the S&P 500 over that period. This massive underperformance has hurt true believers in biotech, but for new investors, it’s an opportunity to buy an out-of-favour sector.
Chart 5: Global X S&P Biotech ETF (ASX: CURE)

Source: Market Watch
Tony Featherstone is a former managing editor of BRW, Shares and Personal Investor magazines. The information in this article should not be considered personal advice. It has been prepared without considering your objectives, financial situation or needs. Before acting on information in this article consider its appropriateness and accuracy, regarding your objectives, financial situation and needs. Do further research of your own and/or seek personal financial advice from a licensed adviser before making any financial or investment decisions based on this article. All prices and analysis at 24 January 2024.