2021 January — Are Alternatives the Answer to Avoiding the Bleak Outlook for Stocks & Bonds?
Markets & Investments
The equity markets seemed to have enjoyed a good run last year, and even though it all looked hazy initially, they are being buoyed because of the clarity surrounding the transfer of the Executive branch of our government. Fixed Income markets, on the other hand, has lost its fire, Treasuries are down, and the Barclay Aggregate Bond Index appears to be doing bad as well. There are still several uncertainty issues engulfing the real estate industry, the negative return of the MSCI US REITS index on the 4th of January, for instance, was a clear indication.
Research firms in Wall Street have expressed concerns for lower returns for both fixed income and equities in 2021. We’re not trying to back such predictions here, since experts didn’t get their predictions in 2019 correct as well. As such, I cannot help but agree with the statement of JPM Asset Management via their 2021 Long-Term Capital Market Assumptions.
“Forecasts for public asset market returns, meanwhile, fall sharply: The low starting point for yields translates to a bleak outlook for government bonds, and elevated valuations for equity present a headwind for stocks. Credit and emerging market debt remain brighter spots, but increasingly it is to alternative assets the investors must turn to find higher returns.”
So, ensure you take a second look at your various investment allocations and consult with your financial advisor to be sure you are making a wise investment, taking into considerations the risks involved.
Commercial Real Estate Market
As a sector that is still undergoing some changes, nobody is sure when this sector will become stable again. No doubt industrial properties like data centers, logistics, as well as life science properties were all strengthened as a result of COVID. Many people expected the ecommerce, digitization, and innovative healthcare trend to continue in 2021. Many are also predicting that the increase in vaccines, as well as policy makers creating financial stability with more fiscal policy usage, will put the crisis under control around mid to end 2021.
Nothwitsanding, things will never be the same for some industries again. The drop in National Unemployment rate from 14.7% to 6.7% in December will help the multifamily real estate sector. When will things return to the way they were before the COVID? We can’t be too sure, but the experts are expecting solidarity towards the second quarter of 2021. Retail isn’t going to be easy, because several estimates are showing that recoveries will not occur till 2022. What is going to be left will be those stores with better convenience; a combo of ecommerce and the old brick and mortar. Public safety beliefs and vaccines will step up leisure travel for some, but Leisure and Hospitality could use the comeback of business travel, and returning to life before the COVID will be uncertain as well. Office spaces will return though with some differences from what they were. They may be more common in the outskirts of urban areas. I think the work from the home template will remain considering people’s mental shift and changing technologies. However, let us not undermine the effect that comes with hanging around fellow employees, as well as the impact of collaboration that are based on one-on-one. Not having to be stuck in traffic did help save time and maybe it increased workers productivity, but the multiple daily interruptions you would get from your kid as you work at home will equally have its own impact on your productivity.
We see many loan requests in the office and retail sector but feel there is still too much uncertainy and we do not have to be in a hurry to participate in that sector. We will continue to focus on multifamily and industrial based properties.
