Reciprocity
In this February 12th 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 equity market performance stalled in the week ending February 12 as gains in Technology and Consumer Staples stocks were offset by weakness in Healthcare and Financial stocks. Investors spent time digesting recent U.S. inflation data and the impact of tariff announcements by U.S. President Trump. The U.S. ordered 25% tariffs on all aluminum and steel imports with no exceptions, to begin on March 12. That levy was followed by an order to initiate reciprocal tariffs on every trading partner to start on April 1st. The reciprocal tariffs are aimed at addressing the actual cost levied by foreign countries, as well as an estimation of the barriers to entry for U.S. exports to enter that market. While the U.S. imports a large share of its steel, primarily from Canada and Mexico, net imports of aluminum represented 15% of consumption in 2024. In response, one large beverage producer stated they would switch to plastic bottles rather than absorb or pass on the higher cost of aluminum cans. The policy measures have contributed to commodity price gains but the medium to long-term impact on trade balances, the broader economy, and ultimate commodity demand remains unclear as this transactional trade approach plays out.*
Among other indicators we track, the VIX, an index of expected S&P volatility, was only marginally higher, up 0.8% (0.12) to 15.9. U.S. inflation breakeven yields rose 7 basis points (bps) for the 5-year segment, and 5bps for the 10-year segment. The U.S. dollar strengthened marginally, ending at 107.9 for the DXY index, an average of the dollar’s performance against major peers. Investment grade credit spreads tightened 2bps and high yield spreads tightened 4bps. Gold prices were also up, climbing ~ $37 to $2,904 as investors factored in potential tariff disruptions. Oil prices were roughly unchanged at $71.37/barrel.*
Against this backdrop the Real Assets markets trailed Global Equities, which were flat for the week. Commodity Futures outpaced Global Equities with Energy and Industrial Metals leading the way. Within energy natural Gas outperformed due to forecasts for colder weather. Within Industrial Metals, Copper and Zinc outperformed as post-Chinese New Year, Asian buyers have returned to market. U.S. tariff implications contributed directly to the rise in metals prices. Additionally, relatively benign economic data from China, better manufacturing PMIs for both U.S. and China, and improved sentiment towards data center build out demand after the DeepSeek announcement, helped drive copper prices and improved sentiment across the complex. Natural Resource Equities outperformed the Real Assets Index on a relative basis on the strength of Metals & Mining names that could benefit from the higher prices of underlying commodities. Conversely, companies in the Agriculture segment underperformed, especially those in Ag Chemicals and Paper & Forestry. Global Infrastructure securities trailed the Real Asset Index as weakness in the U.S. Oil Storage & Transport and MLP (Master Limited Partnership, a legal structure used in the energy sector) segments offset strength in Latin America Airports and companies in Asia ex-Japan. Global Real Estate securities trailed as Asia ex-Japan (Hong Kong REIT and Developers) and Australia (Growth & Rental) led the way while Japan (Developers, REIT), Europe ex-UK (Nordics) and Canada lagged the most.*
Why it matters: Diverging central bank policies, potential trade wars, and new administrations should keep investors on their toes in the coming months. We believe that real assets should play a strategic role in investors’ portfolios, as they could potentially benefit from the risk/return profile in a variety of economic and market conditions.
In the full report:
Macro Dive: This week, we look at price data in the U.S. and updates from the recent global AI summit held in Europe.
Real Assets, Real Insights: This week we will look at apartment fundamentals, AI energy impacts, and the copper dislocations.
This report is for professional/institutional investors only. To access, please validate accordingly and select "Global English" site for a smoother journey.
* Source: Bloomberg, as of February 13, 2025
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. Companies involved in artificial intelligence and big data face intense competition, may have limited product lines, markets, financial resources and personnel. Artificial intelligence and big data companies are also subject to risks of new technologies and are heavily dependent on patents and intellectual property rights and the products of these companies may face obsolescence due to rapid technological developments.
Glossary
One basis point (bps) equals 1/100 of a percentage point.
Artificial intelligence (AI) is the theory and development of computer systems able to perform tasks normally requiring human intelligence.
Credit spread is the difference between the yield (return) of two different debt instruments with the same maturity but different credit ratings.
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 Real Estate Investment Trust (REIT) 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.
The spread is the difference between the quoted rates of return on two different investments, usually of different credit quality.
A tariff is a tax imposed by one country on the goods and services imported from another country.
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 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.
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