Americas Watch - January 2018
Happy New Year and welcome to month 104 of the U.S. economic expansion, already the third-longest-running expansion in U.S. history! As we look back, 2017 was a pretty good year for the U.S. economy. Job growth was robust, consumer and business confidence was buoyant and solid GDP growth persisted. Recently released ISM indices and retail sales numbers also support this assessment. The country even got a tax break just before Christmas, the first major policy achievement of the Trump presidency. This is likely to provide at least a modest boost to the economy going into this year.
While some will attribute much of the boost in the economy (and particularly the stock market) during the last year to a post-election bounce, the favorable global backdrop was arguably more crucial in propelling last year’s activity. Many equity indices outside the U.S. handily outperformed the major U.S. indices in 2017. Europe particularly shined, with its broad and consistent growth across the continent, and the outlook for several major emerging markets brightened as well. These underpinnings should support the current trajectory of the U.S. economy, and property markets, in 2018.
Europe Watch - January 2018
It’s that time again to make your New Year’s resolution… Exercise more, learn a new skill, or use social media less? Sure, but according to a recent survey in the UK, among other popular choices this year are improving one’s finances and finding a new place to live. This month we combine these two intentions and look to the European residential landscape to better understand the choices investors have for accessing the sector as well as assess the scope for performance vis-à-vis commercial property. Demographics are in fact rather supportive in many of Europe’s economically vibrant cities, which is translating into a sector that is becoming more widely embraced. But the landscape is fragmented, and recent performance in markets like Berlin and London has begun to diverge. However, as we move into the latter stages of the property cycle and the likelihood for trend-like performance from traditional property begins to fade, the return profile from the European residential sector looks attractive. As such, property investors should be more adept at sticking with their investment strategies than many already have been with their New Year’s resolutions!
Asia Pacific Watch - January 2018
Australia continues to occupy a favorable risk-return position in our global RARE framework, with out-performing returns being forecast, and we expect comparatively lower market risk. Sydney and Melbourne have been the outperformers while the “commodity cities,” most notably Perth, have proved to be higher risk and lower returning. The Australian economy is forecasted to have an average annual GDP growth rate of 2.7% for the 2018-2022 period, which is in line with the 10-year historic average. The national unemployment rate is forecasted to decrease from the current rate of 5.4% to just 4.9% by 2022 (Oxford Economics, September 2017). The Reserve Bank of Australia has cut the policy rate to a record low to spur growth, but at some stage in the coming years it must likely follow the U.S. Federal Reserve and hike rates. As of yet, there remains little evidence of inflation breaching the target band. But the country is certainly not without risks; a strong house price cycle in recent years and high household debt levels are among the issues we are most closely watching in the year ahead.
Combined Watch Link