Data centres are the new place to be in real estate investment
Real estate is back in demand among investors. Besides interest rate cuts, global trends such as ageing and digitalisation are also supporting the future earnings growth of specific Real Estate Investment Trusts. Think of companies generating income from senior housing and data centres. Mark Van Assche, Private Banking and Wealth Office account manager, talks about it with Christine Hautphenne, fund manager at KBC Asset Management.
06/11/2024
Economy
- All kinds of figures are coming in thick and fast.
- The manufacturing sector remains weak, particularly in Europe. In China, the announcement of the stimulus package seems to be having an initial positive effect, with purchasing managers already taking a more optimistic view.
- Meanwhile, the services sector is doing well, especially in the US. Economic growth in the US is continuing steadily. There is little sign of a slowdown for now, although the latest analysis of the US labour market was surprisingly negative.
Comodity prices - inflation
- Inflation is still on a downward trend in both the US and Europe.
- However, stubborn underlying inflation (especially in the services sector) and the recent volatility of oil prices has been slowing down the disinflation process slightly more than originally thought.
- The impact of policy decisions under a Trump presidency remains to be seen.
Fiscal and monetary policy
- The exceptional stimulus programmes are being scaled back, but there is no sign of savings drift. On the contrary, Trump plans new tax cuts under his leadership, but the extent to which his tariff plans can compensate for this remains to be seen.
- China also continues to regularly support its flagging economy through new policy decisions.
- The Fed cut interest rates by 50bp in September and with 25bp in November. Both rate cuts indicate that the Fed is confident that inflation risk has abated and the focus is now on supporting the labour market.
- Remember that the ECB has also cut interest rates 3 times by 25bp each time.
Bond markets
- Interest rates seem to have peaked, though they remain highly volatile, especially in the US where they have soared in the last two weeks. This is the result of the market pricing in a rate that could well remain higher for somewhat longer than expected.
- Indeed, it is expected that Trump's policies on areas such as migration as well as tariffs could fuel inflation.
Equity markets
- The focus of the Q3 earnings season is behind us both in the US and Europe.
- Expected earnings growth was revised downwards in recent weeks but is still positive in America where profits are up 7%. In Europe, however, earnings growth is stable compared to a year ago.
- The bulk of the expected earnings is still coming from large US technology companies, although that growth is lower than in past quarters.
Risks
- The conflict in the Middle East and Ukraine could continue to cause nervousness. As far as what will happen to the aid to Ukraine, Trump's policy decisions could certainly have a big impact. We are closely monitoring the political developments in Germany.
Trump has achieved a clear victory. Risky assets are benefiting most for the time being, especially in the US
Siegfried top, Senior Investment Strategist KBC Asset Management
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