Displaying items by tag: recession

You can’t talk about the markets in 2022 without mentioning volatility, and it appears investors are just as nervous now as they were last year. That is according to the results of a recent survey from Allianz Life. The firm’s findings in its Quarterly Market Perceptions Study for the fourth quarter of 2022 revealed that 77% of the survey's respondents believe equities will be volatile in 2023, extending the big swings that eventually drove stocks into a bear market in 2022. Stocks were hit hard last year as high inflation prompted the Fed to raise interest rates. The volatility is making most Americans nervous about their retirement portfolios in the face of a potential recession, while inflation is still running hot. In fact, many investors would rather hold onto cash than risk losing money in stocks. Allianz Life found that 64% said they would rather have their money sit in cash rather than endure market swings. The financial services provider also noted that Americans are so concerned about their financial futures that many are halting retirement contributions and are worried about covering their day-to-day expenses. For instance, 65% of respondents said they will adjust their retirement and investment plans if volatility continues, jumping from 57% during the same period last year. Plus, eighty-two percent of Americans are worried that rising inflation will keep hurting their income's purchasing power over the next six months.

Finsum:After suffering crushing losses last year on account of wild market swings, investors are even more concerned about volatility this year, which could result in them sitting in cash and halting retirement contributions.

Published in Wealth Management
Thursday, 02 February 2023 06:47

Bond Investors Bracing for Recession

Based on the latest treasury yield movements, investors are bracing for a recession. Yields on the benchmark U.S. 10-year Treasury note have fallen by around 83 basis points from their October high of 4.338% as investors sent $4.89 billion into U.S. bond funds last week. That marks the third straight week of net inflows. The bond rally comes after Treasuries had the worst year ever, driven by the Fed's tightening policy. The key driver for the current rally has been concerns over the Fed's rate increases sending the U.S. economy into a recession. Treasuries are typically seen as a safe haven during economic uncertainty. Investors expect the Fed to raise rates by another 25 basis points at the end of its monetary policy meeting today, while Wall Street is also looking for signs that the Fed will pull back on its hawkish stance amid falling inflation. Rob Daly, director of fixed income at Glenmede Investment Management told Reuters that "Things are coming off the boil here. There is a de-risking that's happening, and we're seeing flows out of equities into higher quality parts of the market such as fixed income." Although stocks have been rallying since late last year, investors are playing it safe, expecting the rally to end if a recession hits.

Finsum:While stocks have been in a mini rally since the end of last year, investors are playing it safe flooding U.S. bonds funds in the expectation of a recession.

Published in Bonds: Total Market

In an interview with Russ Alan Prince in Financial Advisor Magazine, Jeffrey Schwaber, Chief Executive Officer of Bluerock Capital Markets, stated that he believes real estate is well-positioned to outperform in 2023. He noted that while some economic indicators are pointing towards a possible recession this year, “real estate market fundamentals remain very healthy.” He referenced the difference in real estate during the Financial Crisis and now. For instance, the three key factors that negatively impacted real estate during the financial crisis, supply, leverage, and jobs, are all now healthy. Real estate supply as a percentage of total inventory is the lowest it has been in the "trailing 10-year period compared to previous periods and is forecasted to remain at lower levels." The use of leverage since the Financial Crisis has been the lowest of any “real estate/economic recovery” in the last forty years. As for jobs, the unemployment rate was 3.7% as of November, close to the lowest level in 10 years. In terms of where to invest, Schwaber is bullish on the industrial, life science, and single-family residential sectors. The growth of online retail is driving demand for warehouse and distribution centers on the industrial side. Life science real estate offers an attractive opportunity due to significant growth in biotech research, and the significant undersupply of apartments and single-family rentals is fueling the residential housing market.

Finsum:Due to healthy fundamentals, Jeffrey Schwaber, Chief Executive Officer of Bluerock Capital Markets, believes real estate will outperform this year in the industrial, life science, and single-family residential sectors.

Published in Eq: Real Estate

According to industry group Nareit, REITs are well-positioned to navigate economic and market uncertainty in 2023 due to strong operational performance and balance sheets. As part of their 2023 REIT Outlook, the firm wrote, “despite economic headwinds and weakness in valuations, equity REITs have proven to be quite resilient from an operational perspective, and it is clear that REITs are well-positioned for ongoing economic uncertainty in 2023.” The firm noted that data from the Nareit T-Tracker in the third quarter of 2022 highlighted solid year-over-year growth in funds from operations (FFO), net operating income (NOI), and same-store NOI. Quarterly FFO increased to $19.9 billion in the third quarter, a 14.9% increase from a year ago and an all-time high. While the pandemic took a toll on the operational performance of equity REITs, there’s no question that it has recovered and surpassed pre-pandemic levels. Nareit also noted how REITs historically perform during and after a recession. For example, REITs have historically outperformed private real estate during a recession and in the four quarters after a recession. REITs have also historically outperformed their equity market counterpart before, during, and after recessions.

Finsum:Based on Nareit's 2023 outlook, REITs are well-positioned to navigate market uncertainty and a potential recession due to strong operational performance.

Published in Eq: Real Estate

According to a new report by Edelman Financial Engines, inflation, recessionary fears, and geopolitical uncertainty are undermining financial confidence. The report found that just 23% of more than 2,000 adults that were polled earlier this fall felt “very comfortable” about their finances and only 12% consider themselves wealthy. Even high-net-worth investors are concerned about their finances. Only 44% of millionaires feel “very comfortable” about their finances, with only 29% feeling wealthy. Jason Van de Loo, head of wealth planning and marketing at Edelman Financial Engines, had this to say about the results, “Becoming a millionaire was always the pinnacle of financial success. But at a time when inflation and stress levels are up, and markets and portfolios are down, very few Americans actually feel wealthy.” Edelman Financial Engines also found that most adults feel less financially secure than they would have hoped at this stage in their life. The results match similar responses from other surveys. A separate report by Bank of America found that 71% of workers feel their pay isn’t keeping up with the rising cost of living which brings the number of people who feel financially secure to a five-year low.

Finsum:A poll conducted by Edelman Financial Engines revealed that Americans are less confident about their finances due to inflation and recessionary concerns.

Published in Wealth Management
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