Real Assets rebounded, led by Global Infrastructure
In this November 20th, 2024 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
Real Assets, Real Insights:
Market Commentary
Global equities reversed course during our review period, giving up some of the gains seen after the initial “Trump bump” following the conclusive outcome of the U.S. presidential election. Markets also became wary as the U.S. gave Ukraine the go-ahead to use long-range weapons to strike inside Russian territory (which they immediately did), prompting new nuclear threats from Russia. This led to an increase in equity market volatility, with the VIX Index ending our review at a high for the week at 17.2 after having ended the prior week at 14.0. Despite this, bond yields maintained a relatively tight trading pattern, with the U.S. 10-year Treasury yield ending our review down just 4 basis points (bps) to 4.41%. Inflation breakevens were virtually unchanged for the week. The dollar strengthened, crude oil prices moved marginally higher, while spot gold prices climbed 3% to end our review at $2,651 per ounce and continued to move higher into the weekend but are still short of the record highs of almost $2,800 per ounce seen at the end of October.(1)
Against this backdrop, Real Assets rose this week, with all Real Asset classes outperforming broader global equities. Global Infrastructure securities led the pack with a swift rebound seen in Japanese infrastructure stocks and the North American midstream energy complex performing distinctly well. Commodity Futures and Natural Resource Equities followed, finishing solidly in positive territory, with natural gas futures and metals & mining stocks among the biggest winners. Treasury Inflation-Protected securities (TIPS) finished with soft gains, while Global Real Estate securities saw a marginal loss overall (but still exceeded the broader market’s return) as UK and European property stocks held the group in check.(2)
Why it matters: An escalation of the Ukraine-Russia conflict would be worrisome, especially for Europe, which is already suffering economic woes. We can’t rule out that the recent rise in missile attacks (and rhetoric) could also signify final posturing tactics before some sort of truce next year. Separately, the incoming U.S. administration has signaled some bold plans to cut government spending, which could go far towards balancing a budget, but a swift layoff of (millions of) government employees would likely rankle the economy. There is also the looming specter of the economic impacts from likely increase in tariffs. The level and scope of goods included have yet to be announced; nonetheless, economists are concerned about inducing a new bout of inflation in the U.S. The U.S. Federal Reserve (Fed) appears determined to stay in easing mode (for now), but expectations of when the next rate cut could occur are being pushed back with the current Fed Funds Futures market indicating a ~50% chance of a cut in December and only an ~80% chance of one cut occurring by the January meeting.
In the full report:
Macro Dive: This week, we review the U.S. advance retail sales numbers for October. We also look at the recent S&P release of Purchasing Managers’ Index (PMI) data. Then we cross the pond to look at GDP and inflation numbers in the UK.
Real Assets, Real Insights: We’ll first look at a recent report from DWS on housing affordability and associated impacts on rental markets. Then, we’ll review the dynamics of toll road pricing that has operators and the government pointing fingers at each other in part of Australia. Finally, we‘ll take a look at the latest “hot thing” in precious metals.
This report is for professional/institutional investors only. To access, please validate accordingly and select “Global English” site for a smoother journey.
领英推荐
1) Source: Bloomberg as of November 22, 2024
2) Source: Bloomberg as of November 20, 2024
Any mentions of specific properties or securities are for illustrative purposes only and should not be considered a recommendation. Diversification neither assures a profit nor guarantees against loss. 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. 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.
Inflation is the rate at which the general level of prices for goods and services is rising and, subsequently, purchasing power is falling.
The gross domestic product (GDP) is the monetary value of all the finished goods and services produced within a country's borders in a specific time period.
The Purchasing Managers' Index (PMI) is an indicator of the economic health of the manufacturing sector in a specific country or region.
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 is the popular name for the Chicago Board Options Exchange's Volatility Index. It is a popular measure of the stock market's expectation of volatility based on S&P 500 index options.
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_240/ 101360_27 (11/2024)
Interesting take on government spending cuts! ??