"Transition"
In this March 12th, 2025 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
Reworking the terms of trade and the U.S. economy will take a period of “transition” according to U.S. President Trump. Statements such as that, and others made by administration officials, lowered the market’s belief in a “Trump put.” The intra-day trade spats continued as steel and aluminum U.S. tariffs went into effect, drawing retaliatory measures from targeted nations, and prompting further escalation from President Trump. The trade spat, and its uncertainty, weighed on consumer and business sentiment and threatens to crimp global growth and corporate earnings. One indicator of these concerns was the NFIB Small Business Optimism Index, which fell to 100.7, slowing from a multi-year high of 105.1, touched at the end of the year. Elsewhere, Germany continues to work towards finalizing an increase in defense spending, despite Green party resistance and China is planning local stimulus to help combat negative trade impacts. Other targeted nations have worked on diplomacy, trying to secure exemptions, rather than direct trade confrontation with the U.S. Separately the Bank of Canada trimmed rates 25 basis points (bps) to 2.75% as it attempts to offset the “pervasive uncertainty” of the ongoing trade battle with the U.S.*?
Global equity markets ended the review period weaker, with consumer discretionary and technology stocks falling the furthest, while energy and utility stocks managed to post gains. The Real Assets Index outperformed global equities on a relative basis. Global Natural Resource Equities, Global Infrastructure securities, and Commodity futures outperformed the Real Assets Index with positive returns. Global Real Estate securities lagged the Real Assets Index but outperformed broader global equities on a relative basis. Among other indicators we track, the VIX, an index of expected S&P volatility, rose 10% to 24.2. Inflation break-evens were relatively unchanged for the 10-year segment, and down 2 basis points (bps) for the 5-year, while the nominal yield curve steepened. Credit spreads, the yield premium over sovereign base rates, widened across the credit spectrum, with investment-grade (IG) spreads rising 9 bps and high-yield (HY) spreads rising 31 bps. For the period, the dollar was slightly weaker, ending at 103.61 as measured by the DXY index. Oil prices managed to gain 2% to reach $67.68 per barrel, and gold prices continued to rise, hitting $2,934 per ounce.*
Why it matters: Facing disruption in financial markets, trade flows, and corporate revenues, investors need to stay on their toes to factor in new information and potential outcomes. We continue to monitor the hard data, but also expectations and sentiment, as views and beliefs can translate into actual activity, which is eventually revealed in the hard data.
In the full report:
Macro Dive: We will take a look at inflation and jobs data in the U.S., as well as production and export data in Germany.
Real Assets, Real Insights: This week we will look at mergers and acquisitions (M&A) in the health care segment of the real estate sector, confirmation of infrastructure spending for utilities to support AI, and weather impacts on natural gas demand.
Click here to read the full report.
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* Source: Bloomberg, as of March 13, 2025.
Indexes: Global Real Estate = FTSE EPRA/NAREIT Developed Index; Global Infrastructure = Dow Jones Brookfield Global Infrastructure Index; Natural Resource Equities = S&P Global Natural Resources Index; Commodity Futures = Bloomberg Commodity Index; TIPS = Barclays US TIPS Index; Global Equities = MSCI World Index; Real Assets Index = 30% FTSE EPRA/NAREIT Developed Index, 30% Dow Jones Brookfield Global Infrastructure Index; 15% S&P Global Natural Resources Index; 15% Bloomberg Commodity Index, 10% Barclays TIPS Index. Source: Bloomberg, DWS. Past performance is not indicative of future results. It is not possible to invest directly in an index.
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.
The Bank of Canada (BoC) is Canada's central bank and located in Ottawa.
The?Bloomberg Commodity Index (BCOM)?traces 23 commodities and reflects commodity futures price movements.
Consumer discretionary?is a sector of the economy that sells non-essential goods and services.
Credit spread is the difference between the yield (return) of two different debt instruments with the same maturity but different credit ratings.
The?Dow Jones Brookfield Global Infrastructure Index?measures the performance of pure-play infrastructure companies domiciled globally.
A futures contract is a standardized, contractual agreement to trade a financial instrument or commodity at a pre-determined price in the future.
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.
High-yield?bonds are issued by below-investment-grade-rated issuers and usually offer a relatively high yield.
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.
The?MSCI World Index?tracks the performance of mid- and large-cap stocks in 23 developed countries around the world.
National Federation of Independent Business (NFIB) Small Business Optimism Index is a key indicator of the economic outlook for small businesses in the U.S.
In economics, a nominal value is not adjusted for inflation; a real value is.
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 S&P 500 is an index that includes 500 leading U.S. companies capturing approximately 80% coverage of available U.S. market capitalization.
A sovereign base rate is a key interest rate set by a central bank.
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.
Treasuries?are fixed-interest U.S. government debt securities with different maturities: Treasury bills (1 year maximum), Treasury notes (2 to 10 years), Treasury bonds (20 to 30 years) and Treasury Inflation Protected Securities (TIPS) (5, 10 and 30 years).
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 "Trump put" is the belief that President Trump prioritizes stock market performance and will favor policies that support share prices.
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.
The?yield premium?will increase or decrease depending on the perceived creditworthiness and relative demand for a bond. The yield premium is the mark up relative to a risk-free asset with the same maturity.
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