Patience is not an absence of action

In this January 15th edition of Liquid Real Assets (LRA) Market Update, John Vojticek and team take a look at how public markets viewed listed real assets (real estate, infrastructure, natural resources and commodities).

Click below for the full report, including our Market Commentary, Why it Matters and:

Macro Dive:

• Inflation watch
• Spending the paycheck
• Widgets

Real Assets, Real Insights:

• Supply & Demand (Real Estate)
• Firestorm (Infrastructure))
• Timber!?(Commodities)

Market Commentary

Markets had a positive week of performance after starting the year off on the wrong foot. In the United States, inflation data and jobs data, combined with comments from FOMC (Federal Open Market Committee) voting member Governor Christopher Waller, prompted investors to recalculate their timeline for further rate cuts by the FOMC. Investors priced in a full 25 basis points (bps) rate cut by July, versus the previous target of September. Across the other major indicators we track there was not much movement, with the exceptions of gold and oil. The VIX, an index of expected S&P volatility, fell 1.6 to 16.1. U.S. inflation breakeven yields rose 6bps and 1bp for the 5- and 10-year, respectively. The U.S. dollar was flat for the week as measured by the USD DXY index, an average of the dollar’s performance against major peers. Investment grade credit spreads were unchanged while high yield spreads tightened 6bps to 271bps. Gold prices rose $34 to 2,696 and oil prices followed suit, rising $6.7 to $80. Oil prices responded to additional U.S. sanctions against Russia that were aimed at an additional 158 tankers used to transport Russian crude oil to market. The tighter sanctions impact flows from the Arctic and the Pacific and could change the supply/demand outlook for 2025.*

Against this backdrop, Real Assets outperformed Global Equities. Commodity Futures led the way on the back of performance in the energy sector, where natural gas gains outpaced the rise in oil prices. Natural Resource Equities followed Commodity Futures with Ag Chemicals leading the way, followed by Developed Oil & Gas, with only Emerging Oil & Gas companies posting negative performance. Within Global Infrastructure securities, the Americas region outperformed while Asia-Pacific lagged. European Communications, LatAm Airports, U.S. oil storage and transport, MLP, and Americas Waste companies led the way. Conversely, Americas Utilities was the worst performing sector as the California wildfires weighed on sentiment. Infrastructure securities in Japan and the rest of Asia also posted negative performance. U.S. Treasury Inflation Protected Securities (U.S. TIPS) also outperformed broader global equity markets. Within Global Real Estate Securities, those in the UK (large cap), Europe (diversified), and Japan (developers) outperformed, while those in Asia ex-Japan (HK REIT, investors, developers), Canada, Australia (growth), and the Americas (data centers) lagged. In U.S. Real Estate Securities, the timber and specialty sectors had the strongest performance.

Why it matters: Investors await the new U.S. administration and the policies it will implement. However, in the meantime, there are still plenty of current events for capital markets to digest, including the impacts of California wildfires, U.S. sanctions, and a potential peace deal between Israel and Hamas which should ease tensions in the region.

In the full report:

Macro Dive: This week, we review inflation metrics, weekly jobs data, and consumer spending, as well as manufacturing data.

Real Assets, Real Insights: The news item of the week has been the California wildfires. We will look at the potential impacts on apartment rentals, utilities, and timber prices.

Click here to read the full report.

This report is for professional/institutional investors only. To access, please validate accordingly and select "Global English" site for a smoother journey.

*Source: Bloomberg, BLS as of January 16, 2025

Any mentions of specific properties or securities are for illustrative purposes only and should not be considered a recommendation. Past performance is not a guarantee of future results. The opinions and forecasts expressed are those of the authors and may not come to pass. Forecasts are based on assumptions, estimates, views and hypothetical models or analyses, which might prove inaccurate or incorrect.?Forecasts are not a reliable indicator of future returns. DWS does not intend to promote a particular outcome to the U.S. election (or other countries’ elections) due to take place. Readers should, of course, vote in the election as they personally see fit. All investments involve risks, including potential loss of principal. Index returns do not reflect fees or expenses, and it is not possible to invest directly in an index.

Glossary

One basis point (bps) equals 1/100 of a percentage point.

Credit spread is the difference between the yield (return) of two different debt instruments with the same maturity but different credit ratings.

The Federal Open Market Committee (FOMC) is the committee that oversees the open-market operations (purchases and sales of securities that are intended to steer interest rates and market liquidity) of the U.S. Federal Reserve.

A futures contract is a standardized, contractual agreement to trade a financial instrument or commodity at a pre-determined price in the future.

Inflation is the rate at which the general level of prices for goods and services is rising and, subsequently, purchasing power is falling.

Investment grade (IG) refers to a credit rating from a rating agency that indicates that a bond has a relatively low risk of default.

A REIT (Real Estate Investment Trust) is a company that owns and, in most cases, operates income-producing real estate. REITs sell like a stock on the major exchanges and invest in real estate directly, either through properties or mortgages.

The spread is the difference between the quoted rates of return on two different investments, usually of different credit quality.

The S&P 500 is an index that includes 500 leading U.S. companies capturing approximately 80% coverage of available U.S. market capitalization.

Treasury Inflation-Protected securities (TIPS) are a form of U.S. Treasury bonds designed to protect investors against inflation. These bonds are indexed to inflation and pay investors a fixed interest rate as the bond's par value adjusts with the inflation rate.

The U.S. Federal Reserve, often referred to as "the Fed," is the central bank of the United States.

The VIX (CBOE Volatility Index) is a trademarked ticker symbol for the Chicago Board Options Exchange Market Volatility Index. It is a popular measure of the volatility of the? S&P 500 as implied in the short-term option prices on the index.

Yield?is the income return on an investment referring to the interest or dividends received from a security and is usually expressed annually as a percentage based on the investment's cost, its current market value or its face value.

075221_246/ 101360_33 (1/2025)