Dec 1, 20224 min read

HEADWINDS ARE SHIFTING TO TAILWINDS FOR REITS

01/12

Headstrong headwinds which knocked the sails out of global stock and REIT markets in 2022 are slowly changing direction to become tailwinds, setting the course for a turnaround soon. This was something DEAR that we shared in our REITS Quarterly class on 26 Nov 2022, our 33rd year of Financial Education and Teaching at the Hilton Singapore Orchard.

A big game changer for markets and REITs was the possible peak in inflation data of 7.7% on 21 Oct 2022, down from the peak of 9.1% reported just 2 months prior. That triggered a huge >5% rally in the Dow Jones in a single day. This was only the 23rd time of >5% gain since the Dow Jones started in 1896! It could prove pivotal and be a major game changer in the months ahead.

Wed 30th Nov 2022 saw the Dow Jones and S&P 500 shot up 2.18% and 3.09% respectively after Chairman Jerome Powell delivered his hawkish speech at the Brookings Institution. He had continued to emphasized that interest rates will rise further, albeit at a slower pace, and that they’ll need to remain elevated for some time to bring inflation down, same hawkish tone, similar to previous speeches.

Nothing new from his emphasis, but the recognition that “it makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down”, is sufficient to signal to stock and REIT investors that the pace of interest rates moderating may come as soon as the mid-Dec 2022 Fed Meeting, was sufficient to send markets dizzying up. This was again what we had emphasized in our 26 Nov 2022 REITS Quarterly class – The headwinds need NOT turn yet, but markets and REIT prices will start to turn when the negatives need only become LESS negative!

We also shared that the 2022’s REIT market which have been described as Erratic and Tumultuous, was no different from the last interest rate upcycle of 2018 where we saw see-saw price swings of 5 – 12% over seven periods within the year.

But if history is any good guide, the REIT market staged a fantastic 210 point move from 762 to 972 points, measured by the FTSE ST REIT index from Dec 2018 till 19 Feb 2020, a period of 15 months thereafter. However, the bulk of the 27.44% up move, came during Dec 2018 and Aug 2019 period where the Fed Reserve did NOT cut interest rates. The Fed only started trimming interest rates on 1 Aug 2019. Markets need NOT have to wait for the Fed to start cutting rates to stag a fire-cracker rally. You only need the negatives to become LESS negative. The same could happen in the current situation.

Of course, a few swallows do not a summer make.

We will still be monitoring closely a few variables like –

1. 10-year Treasuries yield

2. The reversion of the 2-year vs 10-year bond yield as detailed clearly in our recent Lianhe Zaobao media interview on Wed 16 Nov 2022

3. Other proprietary indicators that we have used and tested through thick and thin conditions in our last 33 years of investment teaching and education.

We are probably one of the first to be looking for a turnaround soon in the current market malaise.

Popular media and so called “experts” in investing as rely on facts, models, mathematical models and analysis. But at GCP Global, we have always taught that there is no such thing as a future fact. Facts, by definition, are historical and are something that have happened in the past.

What this means is that investing is as much a creative and intuitive process as it is an analytical process. Thus, we have always trained our REIT investor students to think in both creative as well as analytical way, by making assumptions that have high accuracy of happening and develop a great sense of timing. We have always emphasized that a savvy sagacious investor will depend on your ability to synthesize information and to see things that no one is able to see or refuse to see/imagine at the right timing.

And right timing is a concept that a lot of market “experts” and analysts have proffered as very difficult or impossible.

Afterall, by definition, if you want to earn outsized returns that no one is earning, you have to do things that others will not do/lazy to do, at the right time.

OUR LATEST MEDIA INTERVIEW ON REITS, TECHNOLOGY & DISRUPTOR INNOVATORS –

1. S-REITS UNDER SEVERE STRESS – Our Lianhe Zaobao Interview Wed 16 Nov 2022

https://www.linkedin.com/posts/gabriel-yap-8745b822_interview-reits-inverse-activity-6998608672159412224-N3q-?utm_source=share&utm_medium=member_desktop

2. UPCOMING Q3 RESULTS WILL BE PIVOTAL FOR S-REITS FOLLOWING ONE OF THE WORST ROUTS – Our Business Time Interview Thu 20 Oct 2022

https://www.linkedin.com/posts/gabriel-yap-8745b822_interview-business-reits-activity-6988662368247414785-ecfD?utm_source=share&utm_medium=member_desktop

3. IS THAT WHY ASCENDAS REIT SURGED TODAY? Our Lianhe Zaobao Interview FRI 9 SEP 2022

https://www.linkedin.com/posts/gabriel-yap-8745b822_is-that-why-ascendas-reit-surged-today-our-activity-6973979178803093504-HyJB?utm_source=share&utm_medium=member_desktop

4. REITS AS GREAT INVESTMENTS – National Day Interview 9 Aug 2022, BIZ TECH

https://www.linkedin.com/posts/gabriel-yap-8745b822_tech-interview-reits-ugcPost-6962685236212064256-oVyj?utm_source=share&utm_medium=member_desktop

5. S-REITS MARKET MUST STEP UP – Our Business Time Interview 9 Jul 2022

https://www.linkedin.com/posts/gabriel-yap-8745b822_s-reits-market-must-step-up-our-business-activity-6954980627293097984-tWe6?utm_source=share&utm_medium=member_deskt

6. BETTER INVESTOR EDUCATION AND PROTECTION FOR A THRIVING REIT MARKET – 26 May 2022, BUSINESS TIMES