BHR - Higher For Longer? Focus On The Balance Sheet

2024-04-27 07:00:00 ET

Summary

• Inflation is rising, and GDP growth is slowing, posing risks to the US economy.
• The Federal Reserve may need to choose between fighting inflation and protecting economic growth.
• REITs with strong balance sheets, such as Realty Income and Prologis, are well positioned to navigate the challenges of higher inflation and rates.

Coproduced with Leo Nelissen.

I have been in the “higher-for-longer” camp for a while as I just did not believe that inflation would make its way back to 2% as quickly as the average market participant may have expected.

After all, going into this year, the market expected six rate cuts.

Now, the implied probability of no more than one cut has risen to roughly 50%.

Not only did the all-item consumer price index come in higher than expected for four consecutive months, but it started rising recently.

Unfortunately (believe me, I’m not rooting for my thesis to be right), this is confirmed by the latest data....

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