“Be fearful when others are greedy and greedy only when others are fearful” - Warren Buffett
The first quarter of 2024 has been marked by volatility in investor sentiment. The period started after a Santa rally of sorts as investors bet on the retrenchment of inflation pushing risk assets higher. But come the start of the year, confidence reversed in the UK with equity markets selling off. Across the pond, the public markets continued to rally on an AI driven boom until the end of the quarter, which saw higher than forecast inflation and rising geopolitical risks threatening to impede the meteoric rise in US equities.
As we’ve forecast for several quarters, inflation is proving stickier than the market previously predicted, especially in the US. We strongly believe that the spillover effects of wages and services should not be underestimated. When it comes to rates, especially towards the longer end of the curve, geopolitical risk will be playing a part in keeping yields elevated regardless of decisions made by central banks. The developing escalation in the Middle East poses a genuine concern to the global economy. Conflict often impairs decision making, and the longer the hostility continues, the greater the risk of unintended consequences with dire ramifications.
The UK economy demonstrated positive momentum in the first quarter with further GDP growth in February of 0.1%. From this position, it would take a sharp reversal in fortunes for the UK not to pull itself out of the technical recession it slipped into at the end of last year. The FTSE 100 reached an all-time high post quarter end despite the negative sentiment towards UK equity markets.
Notwithstanding continued low real estate investment volumes, there are signs investor sentiment is starting to turn. In the office market, buyers are now coming forward for assets at the right level of quality and in the best locations. In residential, we foresee a long-term change in the makeup of the housing market as the UK embraces a rental model with longer tenure.
As the market begins to turn, we are on the front foot and taking the ‘Oracle of Omaha’s’ advice of being greedy when others are fearful. Timing the market is often a fool’s errand, but we believe the window of fear, where the most prosperous investments can be made, is closing. The market is presenting ample opportunities to those who understand the operational intensity of real estate which is beginning to outweigh interest rate risk.
To read this quarter's report, follow the link below.
Simon Cooke
Ben Kennedy
Chalwe David Silwizya MRICS
Elaine Madden
Henry Whittley
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