Real Estate
In this Strategy Outlook, we present the major investment themes and views we see playing out for the rest of 2023 and beyond.
Investors are still cautious and have significant cash that needs to be put to work. Trickle-down of it into the US equity market may extend the rally. Overly bearish futures positioning is also a strong contrarian indicator. Disinflation is good for real earnings growth, and imminent earnings rebound may add support for equities.
A benign disinflation will support equities over the next few quarters. Stocks will fall next year as a recession begins when investors least expect it.
Once the debt ceiling soap opera ends, investors will likely turn their attention to some of the tailwinds supporting stocks. These include stronger earnings growth, diminished bank stresses, better housing data, early signs of an upleg in the manufacturing cycle, the prospects of an AI-driven productivity boom, and the fact that labor slack has managed to increase without rising unemployment. Investors should resist turning bearish on stocks for now but look to become more defensive later this year.
The outlook is downbeat for the share prices of both onshore and offshore Chinese property developers in absolute terms, and relative to China’s overall equity benchmark. A marginal increase in housing construction activities in the rest of this year implies that there will be not a meaningful recovery in the demand for commodities, such as iron ore, steel, cement and glass.
A benign disinflation is probable during the remainder of 2023. Unfortunately, just when most people become convinced that a recession has been avoided, a recession will begin.
When complexity collapses, it is a red flag for impending tail-events, heart attacks, and reversals in the markets. We describe how to measure complexity, how to spot the red flag that it has collapsed, and list some investments that are approaching potential turning-points.
This week we are sending you a Style Chart Pack, which now includes a standalone macro section, as well as macro, fundamentals, valuations, technicals, and uses of cash charts for the S&P 500, Defensives vs. Cyclicals, Growth vs. Value, and Small vs. Large. In the front section of this publication, we will review recent equity performance, and attempt to answer real estate sector-related questions that are foremost in investors’ minds.