Stock picking

Stocks to monitor ahead of interest rate cuts

Central banks' monetary policy decisions can have a significant impact on global markets and investment opportunities.
In recent times, attention has been focused on the possibility of a rate cut as early as 2024 by the main financial institutions.
In this context, some stocks stand out as particularly sensitive to any changes in monetary policies.
Among these, the real estate sector and in particular the real estate REIT sector attracts the attention of investors.
Focus on REITs-themed ETFs A rate cut could stimulate the real estate sector, reducing mortgage costs and encouraging home purchases.
Real estate companies and publicly traded real estate funds could benefit from an increase in activity in the real estate market.
One of the stock market classes most to be monitored at this time could therefore be REITs (real estate trusts) and ETFs which aim to replicate the performance of this stock market sector.
During 2022 and the first half of 2023, this category suffered significant losses based on the assumption of a continuation in the rate increase process and then under the assumption of “higher rates for longer”.
Although the latter has not yet been excluded by central bankers, but also continues to be the mantra repeated to investors in the latest press conferences, the market seems to have already started to move as if to discount a lowering of the level of rates.
This is quite clear by taking some representative indices of the European real estate trust market as an example; in Europe, economic conditions express a greater contraction than those in the United States, reinforcing the idea that Europe may witness the first cuts, earlier than in the United States.
The IPRP (iShares European Property Yield) ETF has started a strong bullish trend from the October lows; up approximately 18%, realizing a very significant return for an ETF of this type.
Similarly, the ETF of the same company, IWDP (iShares Developed Markets Property), which instead seeks to replicate the performance of global REITs, compared to the lows of October, has also hinted at a restart, recording a rise just above below 6%, still positive but evidently lower than the purely European one.
Stocks to Watch Ahead of the Rate Cut Of course, individual REITs are also starting to show a significantly bullish trend.
The most discussed is without a doubt PROLOGIS (PLD), which is rising from the lows of 14%.
In Europe, however, Unibail-Rodamco-Westfield (URW) is starting to stand out, marking an incredible comeback compared to the October lows of around 30% on the Euronext in Paris.
This parallel clearly shows how the real estate trust market is moving differently depending on the geographical area.

Author: A.W.M.

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