Investors are increasingly turning their attention to the real estate sector as the Federal Reserve signals a potential shift toward lowering interest rates. Over the past month, five major U.S.-listed real estate ETFs have collectively seen net inflows of $2.2 billion, a figure that accounts for more than half of their total inflows over the last year. 

This surge in capital reflects growing confidence that the real estate sector stands to benefit from anticipated lower borrowing costs and a more favorable economic environment. 

Fed Chair Jerome Powell recently hinted at the Jackson Hole Symposium that rate cuts could be on the horizon, driven by signs of a cooling labor market and progress toward the 2% inflation target. As a result, ETFs like the iShares U.S. Real Estate ETF (IYR) and the Vanguard Real Estate ETF (VNQ) have seen substantial inflows, reinforcing the sector’s strong recovery and positioning it as a key beneficiary of potential monetary easing.

Finsum: Focus on REITs with single family rental performance, because corporate real estate is still dependent on hybrid/work from home policy.

This year, major private equity firms like Blackstone, KKR, and Carlyle have significantly slowed their investment activity in China, reflecting growing geopolitical tensions and Beijing’s tighter control over businesses. 

Once a thriving market, China's appeal has diminished rapidly, with only five small investments made by the top 10 global buyout firms this year, a stark contrast to the 30 deals made in 2021. The change marks a sharp decline in enthusiasm from international investors who once saw China as a goldmine. 

Factors contributing to this downturn include geopolitical challenges, regulatory unpredictability, and a cooling economy. The slowdown in China-specific deals is more pronounced than the global trend, which has also been affected by rising interest rates, making debt-driven private equity models more costly.

Finsum: Taking stock of these geopolitical factors in important for any portfolio. 

California’s high-yield municipal bonds, intended to fund housing for essential workers like police officers and teachers, are under financial stress. The state issued between $8 billion and $10 billion in speculative municipal bonds to convert existing apartments into affordable housing for middle-income families, but these projects are now struggling due to rising interest rates and declining occupancy.

 Local agencies often borrowed beyond the purchase price, assuming high occupancy would cover expenses, but that assumption has proven risky as the economic landscape shifts. The bonds, many of which were sold when interest rates were historically low, now face significant challenges as financial conditions tighten. 

Experts are increasingly doubtful about the sustainability of this workforce-housing model, which has not yet been tested across different economic cycles.

Finsum: We are in a time for major changes to the muni market as interest rates fluctuate. 

Morgan Stanley's CEO Ted Pick announced that artificial intelligence could potentially save the bank's financial advisers 10 to 15 hours per week by automating tasks such as transcribing and entering notes from client meetings. This AI tool is expected to significantly boost adviser productivity and help tailor investment strategies to better meet the needs of wealthy clients. 

Pick also predicted that high interest rates in the U.S. will continue, aligning with views from leaders at JPMorgan Chase and Goldman Sachs, and noted that this environment could benefit the bank's trading and market-making activities. 

Morgan Stanley plans to expand its lending to high-net-worth clients through more advanced financial products as deposits increase. Pick emphasized the bank’s commitment to maintaining its dividend while suggesting that stock buybacks would be influenced by market conditions. 

Finsum: By using AI to boost productivity this extra time could be devoted to deepening client relationships or new client adoption. 

Separately Managed Accounts (SMAs) offer notable advantages for institutional investors looking to invest in cryptocurrencies compared to ETFs. While ETFs have become popular among new crypto investors, SMAs provide direct ownership of assets, allowing for greater customization of portfolios and tailored risk management. 

This direct control also facilitates more effective tax strategies and access to a broader range of digital assets beyond just Bitcoin or Ether. Unlike ETFs, which are passive, SMAs benefit from active management, enabling investors to adjust their portfolios in response to market changes and potentially achieve higher returns. 

Additionally, SMAs operate in the 24/7 crypto market, avoiding the limitations of traditional market hours and minimizing the risk of price gaps. For high-net-worth individuals and institutions, the flexibility, personalized approach, and potential for outperformance make SMAs an increasingly appealing option over ETFs.

Finsum: Being able to have access to a cryptocurrency 24/7 is a critical advantage because their markets react overnight with great frequency.