Real Assets outperformed

In this edition of Liquid Real Assets (LRA) Market Update, John Vojticek and his 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

• Summer holiday
• American consumers bounce back
• Global Economy in a Sticky Spot

Real Assets, Real Insights:

• Green shoots grow from the concrete (Real Estate)
• Global real estate mid-year outlook (Real Estate)
• UK utility get the royal treatment (Infrastructure)

Market Commentary

Global equities finally took a breather, posting a marginal decline this week, although the MSCI World Index did touch a new all-time high during our review period. Perhaps more interesting, during this period, value outperformed growth in large caps by over 8% (comparing the Russell 1000 Growth vs. Russell 1000 Value), and small caps beat large caps by an even wider margin of almost 10% (comparing the Russell 1000 vs. Russell 2000). Investors must now assess whether the recent shift in market complexion is durable or merely mean-reverting. Multiple U.S. Federal Reserve (Fed) speakers indicated conditions were ripening to begin easing rates in the U.S., although they remained uncommitted on the timing of a first rate cut. This uncertainty also helped fuel the nascent bond rally (where prices rose and yields fell), reinvigorated interest in gold (spot prices touched an all-time high), and weakened the U.S. dollar. Against this backdrop, Real Assets outperformed global equities by almost 3%, led by exceptional, broad-based strength from Global Real Estate securities. Global Infrastructure securities and Natural Resource equities also finished solidly in positive territory, helped by strength from Americas communication names and agricultural equities. Treasury Inflation-Protected securities (TIPS) saw slighter but still positive returns, while Commodities declined, lagging global equities as natural gas and industrial metals pulled back. (1)

Why it matters

Equity market volatility (per the VIX Index) has made a notable move higher in recent days while bond market volatility remains elevated (per the MOVE Index) but has come off the highs of 2022 and 2023. The equity market rotation over the last week has been historic in its magnitude and seems to be driven (at least partly) by the recent assassination attempt on former President Trump and increasing odds that he will win the U.S. presidential election in November. But with a change of control in any branch of U.S. government comes increased risk of dramatic changes in policy. How these could impact the relative attractiveness of certain asset classes or sectors is still not fully understood by the capital markets, but some ideas are starting to surface. Will tax policy drive further concern about US deficits? Will new tariffs protect U.S. interests, or will they reignite inflation and irk China? It’s too early to tell, but well worth watching closely. (2)

In the full report:

• Macro Dive: To start, we’ll review the outcome of the latest European Central Bank (ECB) meeting. Next, we’ll look at the latest retail sales data in the U.S. and how it might support economic growth. Then, we’ll take a wider look at potential global economic growth as presented by the International Monetary Fund (IMF)
• Real Assets, Real Insights: We’ll first look at some potential optimism surrounding the New York office market. Next, we will broaden our real estate view with a look at DWS’s mid-year Global Real Estate Strategic Outlook. We’ll conclude with a review of a few of the comments from the King’s Speech as they relate to regulated utilities in the UK.

Click here to read the full article.

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1) Source: Bloomberg as of 7/17/24

2) Source: Bloomberg as of 7/19/24

Any mentions of specific properties or securities are for illustrative purposes only and should not be considered a recommendation. Past performance is not a guarantee of future results. Forecasts are based on assumptions, estimates, views and hypothetical models or analyses, which might prove inaccurate or incorrect.  Past performance is not a reliable indicator of future returns.

DWS does not intend to promote a particular outcome to the U.S. election (or other coun-tries’ elections) due to take place. Readers should, of course, vote in the election as they personally see fit.

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.