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After a year when performance in equity markets was almost entirely due to the so-called "Magnificent Seven", with enthusiasm driven by the effects of Artificial Intelligence (AI) on their revenues and profits, 2024 has started the same way. Nvidia and Meta are regarded as the biggest beneficiaries of AI, up 45% and 30% just in the first two months of 2024. However, some cracks are appearing as both Apple and Tesla are down year-to-date on disappointing earnings and outlooks. 

With interest rates expected to fall this year and the Federal Reserve forecasting three 0.25% reductions to 4.5% by year-end, even if this is not by as much as more optimistic investors had expected, sectors regarded as value plays, such as utilities, pipelines, telecoms, and financials, are set to outperform this year, as they did in 2022 when the S&P 500 fell 20% and the Nasdaq 30%. With the hoped-for soft landing looking problematic, defensive sectors with good balance sheets and sustainable dividend yields look attractive. It's never wrong to take profits, especially when the gains on the "Magnificent Seven" have been so enormous. Investors should reallocate some capital to companies that have delivered decent earnings but are much more favorably valued. This could include stock markets such as Canada and the UK, which have large weightings in financials, energy materials, utilities, and telecoms.