REIT, Stock and Bitcoin prices continue to fall – Will I buy now or wait? (as a Singapore Investor in 2024)

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As promised, I wanted to supply an update connected markets aft this week’s events from Jerome Powell (FOMC) and Janet Yellen (Treasury Quarterly Refinancing).

This would springiness america immoderate denotation of really nan Feds and US Treasury are responding to (a) caller weakness successful banal markets, and (b) sticky US inflation.

I don’t usually do this, but let’s commencement pinch nan value action.

And past we’ll move connected to nan basal discussion.

   

This is an FH Premium article written this week.

I wanted to merchandise it to each readers truthful you person an penetration into my latest macro views.

If you find this useful – do motion up for FH Premium for much premium articles for illustration this. 

I stock my afloat banal / REIT watchlist, and individual portfolio (with play updates) connected FH Premium.

Market Price action is unspeakable – suggesting short word caution

Generally speaking, marketplace value action has not been pretty.

There has been a important nonaccomplishment of momentum successful cardinal markets, and a batch of cardinal support levels person been broken.

This would propose immoderate be aware is warranted successful nan short term.

Bitcoin / Crypto frontruns accepted banal markets – and is signalling caution

I’ve shared successful nan past really Bitcoin / Crypto frontruns accepted markets by astir 2 – 3 weeks this cycle.

For illustration successful Oct 2023 Bitcoin bottomed earlier stocks – which allows america to usage Bitcoin arsenic an early informing for stocks / REITs.

The Bitcoin charts are not pretty.

2 weeks agone I shared that $57,000 – $59,000 is nan cardinal scope I would beryllium looking for.

That scope has been deed this week.

The support has held for now though, truthful if this holds it would beryllium a bullish sign.

But nan truth is that Bitcoin remains successful a downtrend, which does not awesome good for consequence assets.

Crypto ex Bitcoin and Ethereum tells a akin story.

Yes nan support has held for now, and if this holds would beryllium a bully constituent to accumulate.

But again nan short word downtrend remains intact.

US Stock Markets – S&P500 down 5% from highs

Here’s nan S&P500.

4800 would people a 10% drawdown from nan top.

Where we are coming is astir a 5% drawdown from nan top.

And it remains to beryllium seen if nan short word downtrend will continue, aliases reverse higher.

US 10 twelvemonth output remains precocious – but is this a turning point?

US 10 twelvemonth output remains supra nan 4.5% threat zone, which is not good.

What is bully though, is that 10 twelvemonth yields look to person peaked astir 4.7% for now, and dropped to 4.6% aft this week’s Treasury and Fed announcement (more connected this below).

If 10 twelvemonth yields highest and reverse, that could beryllium bullish for stocks and REITs.

Singapore REIT prices stay adjacent lows

REIT prices person rebounded a little, but arsenic a full stay very adjacent to nan caller lows.

Oil prices person started to driblet – which is bullish for stocks / REITs

The last floor plan I wanted to item is oil.

Oil seems to person peaked astatine debased 90s for now, and has dropped backmost to 83.

This is really beautiful bullish arsenic little lipid prices has profound knock-on implications for ostentation going forward, and could thief facilitate Fed complaint cuts.

What was nan large basal news this week from a macro perspective?

This was a beautiful large week from a macro perspective.

We had:

  1. Janet Yellen – Treasury Quarterly Refinancing
  2. Jerome Powell – FOMC
  3. US Inflation data

Janet Yellen – Dovish aliases Hawkish for stocks / REITs?

Treasury Quarterly Refinancing

The Treasury Quarterly Refinancing sets retired really nan Treasury plans to money nan borrowing needs of nan US government.

This matters because nan US authorities is moving a immense fund deficit.

If they money it each via agelong word Treasuries – you’ll spot agelong word liking rates sprout up (like they did successful mid 2023, which is bad for stocks / REITs).

If they money it mostly via short word T-Bills – you’ll spot agelong word liking rates driblet (like they did successful precocious 2023, which is bully for stocks / REITs).

Note: I’ve been asked to explain connected nan move supra by a FH Premium subscriber. Please spot illustration below:

Let’s opportunity Treasury needs to get $100.

If they get $80 successful Treasuries and $20 successful T-Bills, that’s a batch of Treasuries proviso – truthful value drops and yields spell up.

If they move to opportunity $80 successful T-Bills. That’s very small Treasuries proviso – truthful value goes up and yields drop.

It’s what Yellen did successful Oct 23 that sparked nan large driblet successful yields.

So by playing astir pinch really overmuch T-Bills vs Treasuries, Yellen tin benignant of manipulate marketplace liking rates – which undermines what Powell is doing. Hence nan request to look astatine nan Fed and Treasury holistically these days.

Treasury issuance is level – and will enactment level for nan “next respective quarters”

2 large points announced by nan Treasury this week.

First – is that nan magnitude of Treasury issuance for nan adjacent 4th will enactment astir flat.

Current levels of Treasury issuance is very high, and keeping it location is not a bully sign.

That’s wherever nan 2nd constituent comes successful –the “Treasury does not expect needing to summation nominal coupon aliases FRN auction sizes for astatine slightest nan adjacent respective quarters.”

So yes… issuance will stay astatine existent levels which are very high, but astatine slightest it’s not going to summation immoderate further from here.

So while keeping Treasury issuance astatine existent elevated levels is decidedly not a bully sign.

Coupled pinch nan guardant guidance I would opportunity it’s not outright bearish.

Jerome Powell  – Dovish aliases Hawkish for stocks / REITs?

There were 2 large announcements from Jerome Powell this week:

  1. Interest Rates
  2. Quantitative Tightening

Interest Rates – Rates hikes unlikely, adjacent move is still cut

Remember really earlier this nan marketplace was pricing successful a slim chance of different liking complaint hike by Jerome Powell?

Well Jerome Powell wholly unopen that down this week:

“I deliberation it’s improbable that nan adjacent argumentation complaint move will beryllium a hike. I would opportunity it’s unlikely“.

No liking complaint hikes going forward, adjacent move from Powell is still going to beryllium an liking complaint cut.

This successful itself is bullish, arsenic it cuts retired nan tail consequence of further complaint cuts.

However, much advancement connected ostentation required earlier liking complaint cut

When will that liking complaint trim happen?

Here’s what Powell had to say:

“In caller months, location has been a deficiency of further advancement toward nan Committee’s 2 percent ostentation objective“.

“For america to statesman to trim argumentation restriction, we want to beryllium assured that ostentation is moving sustainably down to 2%. For sure, 1 of nan things we would beryllium looking astatine is nan capacity of inflation. We would beryllium look astatine ostentation expectations. We would beryllium looking astatine nan full story. Clearly, incoming ostentation information would beryllium astatine nan very bosom of that decision.”.

To sum up – yes, nan adjacent move from Powell is still going to beryllium an liking complaint cut.

But Powell wants immoderate clear grounds ostentation is coming down earlier cutting.

Quantitative Tightening reduced from $60 cardinal a period to $25 cardinal a month

The large news though, is nan alteration to Quantitative Tightening (QT).

Before this, nan Feds were “selling” $60 cardinal successful Treasuries a month.

But:

“Beginning successful June, nan Committee will slow nan gait of diminution of its securities holdings by reducing nan monthly redemption headdress connected Treasury securities from $60 cardinal to $25 billion“.

This was rather a bullish improvement from Powell.

US Inflation remains very sticky

On US ostentation – I could propulsion up immoderate of nan different metrics released nan past fewer weeks.

But each show nan aforesaid story.

US ostentation bottomed successful Q4 2023, and started to reaccelerate successful Q1 2024.

This has created large problems for nan Feds looking to trim liking rates.

What does this each mean for stocks / REITs?

Putting everything together.

US Treasury will support Treasury issuance astatine elevated levels, but it will not summation going guardant (future increases is via T-Bills).

Feds will not raise liking rates immoderate further, but will support rates present until ostentation comes down.

BUT – they will easiness backmost connected Quantitative Tightening, from $60 cardinal to $25 cardinal a month.

Market is now only pricing successful 1 liking complaint trim successful 2024.

Personal View – Not arsenic bullish arsenic precocious 2023, but not outright bearish either

I deliberation it’s clear that this is not arsenic bullish arsenic precocious 2023 erstwhile some Yellen and Powell flipped dovish.

So if you’re expecting a Nov – Q1 style rally successful stocks and REITs nan adjacent fewer months.

I don’t deliberation we’ll spot that unless thing changes connected nan ostentation beforehand (or if thing breaks that forces emergency Fed action).

But it’s clear that nan US Treasury and Central Bank person gone retired of their measurement to debar adding to nan marketplace pain.

US Treasury (Yellen) has offered guardant guidance connected nary summation successful US Treasury issuance going forward.

Central Bank (Powell) has (a) confirmed nary further complaint cuts, and (b) reduced QT rather drastically from $60 cardinal a period to $25 cardinal a month.

So nan cardinal argumentation makers are going retired of their measurement to debar a marketplace clang nan adjacent mates of months too.

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What will Powell / Yellen do successful a US predetermination twelvemonth – to support banal markets?

The funniest portion was erstwhile Powell was asked by a newsman if he would return elections into information erstwhile mounting liking rates.

This was his response:

“We conscionable don’t do that.

You tin spell backmost and publication nan transcripts forever.

This is my 4th election, 4th statesmanlike predetermination here.

Read each nan transcripts.

 See if anybody mentions, successful immoderate way, nan pending election.

It conscionable isn’t portion of our thinking.

It’s not what we’re hired to do.

If you commencement down that road, I don’t cognize really you stop”.

Yes I get that location was thing other he could person said arsenic nan Chairman of nan astir powerful Central Bank successful nan world.

But c’mon – who are we kidding here.

The past 18 months, Yellen and Powell person mixed to play each kinds of funky games that propped markets up and prevented a sustainable diminution successful inflation.

When Silicon Valley Bank went insolvent successful early 2023, Powell stepped successful to bail them out.

When US 10 twelvemonth rates roseate to 5.0% successful mid 2023, Yellen stepped successful to bail them out.

With this benignant of way record, it’s difficult to spot why that would alteration arsenic we caput into nan US elections.

Policy Mistake by Powell / Yellen?

In precocious 2023 I said that nan pivot from nan Feds was a large mistake.

It came excessively early successful nan cycle, earlier ostentation was durably put down – and would lead to a resurgence successful inflation.

That’s precisely what we’ve seen.

And today, I deliberation Powell is making nan aforesaid correction again.

By doing each they’re doing to prop nan markets up successful an predetermination year.

They’re conscionable kicking nan tin down nan road.

And mounting america up for large problems successful 2025.

This way we are going down, genuinely makes maine fearfulness for a 1970s repetition – pinch waves of ostentation and complaint hike cycles.

Will I bargain stocks / REITs now aliases wait?

But hey – I’m not nan feline mounting policy.

I’m present to waste and acquisition nan marketplace arsenic I spot it, not really I wish it to be.

Short Term be aware – But if existent levels clasp it could beryllium a bully accumulation zone

Looking astatine each of nan above, I deliberation immoderate short word be aware is required.

Price action has mislaid important momentum, and galore cardinal markets stay successful a downtrend for now.

Macro wise, per chat supra – it doesn’t look outright bearish.

But neither is it precocious 2023 level of bullish.

If existent support levels clasp though, this could beryllium a bully scope for accumulation.

Mid Term Bullish?

The Mid Term is tricky.

It each goes backmost to really argumentation makers respond.

Let’s opportunity we are successful 2H 2024.

The world system continues to slow owed to higher US liking rates.

Note that for arsenic agelong arsenic nan Feds don’t cut, nary different cardinal slope tin trim without risking rate depreciation (look astatine Japan).

How does Powell respond successful that scenario?

Does he trim anyhow to boost Biden’s re-election chances?

Does he instrumentality to his guns to crush ostentation and spell down arsenic Paul Volcker 2.0?

Based connected what we’ve seen from Powell nan past 18 months, I would opportunity nan erstwhile is much likely.

In which lawsuit immoderate short word sell-off would beryllium a buying opportunity.

“Comfortable” rate levels proceed to make consciousness successful this climate

That being said, I deliberation you conscionable person to recognise that a batch of things tin spell wrong.

Powell refusing to trim liking rates successful each of 2024 is going to nutrient a very different result from 1 wherever he cuts twice.

Which is why I proceed to opportunity that successful this caller 2020s paradigm of sticky ostentation / higher liking rates.

“Comfortable” rate levels proceed to make sense.

I mean look astatine nan latest Singapore Savings Bonds.

You’re getting paid 3.26% first year, and 3.33% for 10 years – perfectly consequence free.

Which you tin redeem immoderate clip pinch zero superior loss.

In a ambiance for illustration that, coupled pinch each nan macro volatility, “comfortable” rate levels makes sense.

As to what is comfortable, each investor needs to determine this for him/herself.

What stocks / REITs would I buy?

At nan aforesaid time, if Powell cuts into a resilient economy, he could good inflate an plus bubble.

So you want upside vulnerability to consequence assets arsenic well.

My afloat thoughts connected individual stocks / REITs are shared connected FH Premium.

Asset classes I americium keen to prime up are:

  1. US Tech / Bitcoin / Crypto
  2. REITs
  3. Gold
  4. Commodities

US Tech / Bitcoin / Crypto

US Tech / Bitcoin / Crypto will use from immoderate liquidity injections successful a US predetermination year.

This gives nan upside imaginable to my portfolio.

REITs

REITs – nary uncertainty a emergence successful agelong word liking complaint will beryllium bad for REITs.

But nan worst of nan short word liking complaint increases are already down us.

Even if short word rates enactment astatine these levels, if you prime up precocious value REITs astatine nan correct value you should still person a decent separator of safety, and bully dividend yields while you wait.

I would want to instrumentality to precocious value existent property though, US/Europe/China existent property looks very uncertain going forward.

Full database of stocks / REITs I americium looking at, and target prices, are shared connected FH Premium.

Gold

I wrote a agelong article connected Gold for FH Premium subscribers this week.

Long communicative short, golden is an absorbing hedge successful this caller paradigm of rate depreciation, and an absorbing replacement to cash.

I myself clasp a decent allocation to gold, and that has proved to beryllium a very powerful diversifier successful 2024 truthful acold (up 11.7% connected my golden position).

Commodities

Commodities is simply a wildcard.

If location is an economical slowdown, they will underperform.

But look astatine nan supra and I deliberation location is simply a bully chance ostentation will enactment pinch america for a while.

This makes immoderate commodities allocation captious arsenic an ostentation hedge.

Meanwhile location are definite markets for illustration Copper and Uranium that are successful structural demand-supply deficits, that would return years to activity out.

Again – nan afloat database of stocks / REITs I americium looking at, and target prices, are shared connected FH Premium. I will supply updates connected FH Premium arsenic and erstwhile I adhd / waste my positions for my individual portfolio.

This is an FH Premium article written this week – and will not beryllium updated going forward.

I wanted to merchandise it to each readers truthful you person an penetration into my latest macro views.

If you find this useful – do motion up for FH Premium for much premium articles for illustration this. 

I stock my afloat banal / REIT watchlist, and individual portfolio (with play updates) connected FH Premium.

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