Market Quote: Outlook Outtakes II (Indonesia Equities, U.S. Deficit Funding, REITs)
Author: The editor's desk
December 22, 2023
Members of AGF’s Investment Management Team weigh in on the week that was in global financial markets. In this edition, more highlights from AGF’s Outlook 2024 publication.
…Less well-known, perhaps, is the potential in Indonesia, the fourth-most populous country in the world, with a median age of just 30. That huge population remains under-banked (opening huge growth opportunities for banks and online payments firms) and under-connected (with e-commerce comprising only 4% of GDP, versus 11% in China). Indonesia is also a leading supplier of nickel, a key component of electric vehicle batteries. Add the fact that domestic demand is strengthening, and Indonesia is positioned to turn in sustained 5%-plus annual GDP growth… (The Slow Divorce in Emerging Markets)
…True, a U.S. government default seems like a remote possibility, notwithstanding regular congressional debates over the debt ceiling. Yet running ever-higher deficits means that the Treasury must issue more and more bonds. The increased supply puts upward pressure on yields, which, along with those swollen deficits, will likely mean the government will pay more and more in interest… (Who’s Going to Fund the U.S. Deficit?)
…While declining interest rates would take time to be reflected in REIT earnings, history suggests that sentiment on the sector begins to turn positive ahead of time, with real estate stocks beginning to bottom approximately 18 to 24 weeks ahead of a rate cut announcement, according to research from UBS. In our opinion, even moderate interest rate declines would be quite positive for the sector, and 2024 could start a run of outperformance for REITs that has been a long time coming… (What if There’s a Recession (And Central Banks Start Cutting Rates)?)
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