Real Estate

The great US labor market shortage is over. Labor demand will likely fall short of supply by the end of this year, causing unemployment to soar. Neither fiscal nor monetary policy will be able to prevent the coming recession. Investors should underweight stocks and overweight Treasuries.

We project US Multifamily cap rates to increase from 5.2% to 6.5%. While we find an unfavorable risk-adjusted return on the asset, especially relative to other opportunities in CRE, cap rates are moving closer to peak.

The ECB is now firmly in easing mode, even if it refuses to pre-commit to a specific rate path. What does this data dependency mean for the euro and European yields?

Generative AI-related rally resumed in May. Much of the recent market gains are down to excess liquidity that was begotten by the massive pandemic stimulus, creating a dichotomy between multiple economic challenges and exuberant markets. The Fed is unlikely to step in to prevent the bubble as it is currently more worried about the near-term downside for growth than financial stability.

The RMB 500 billion program is small, as it is equivalent to only 4% of property developers' total funding from the past 12 months. This will preclude a recovery in property construction this year. Corporate profits will determine the path of China’s share prices on a cyclical time horizon. Deflation in China will persist for now, which will depress corporate profits even if volumes grow modestly.