GROWING TAILWINDS FUEL A REIT REBOUND
The real estate market is showing signs of stabilizing with strong fundamentals and compelling long-term drivers creating a good entry point for investors.
STRATEGICALLY POSITIONING FOR THE CYCLE’S NEXT PHASE
Adapting to shifting perspectives and investment opportunities
ECONOMIC RESILIENCE DESPITE CONTINUED UNCERTAINTY
Markets continued to rebound strongly in first half of 2024 as major central banks initiated or signaled interest-rate cuts. While economic resilience, healthy consumer spending, and moderating inflation were prominent economic themes, heightened geopolitical risks add uncertainty to the outlook.
GLOBAL ECONOMY SLOWS
The global economy remains resilient but is expected to slow. The U.S. is expected to see moderately positive growth, while the Eurozone modestly rebounds and China’s growth remains healthy.
RATE CUTS ON THE HORIZON
Major central banks initiated rate cuts in the first half, with the U.S. Federal Reserve expected to cut rates later this year.
INFLATION MODERATES
Although moderating, inflation continues to remain elevated, creating timing uncertainty for interest rate cuts.
2H 2024 INVESTMENT THEMES
Against this evolving backdrop, PGIM asset managers highlight key trends that are shaping the second half of 2024 and identify attractive opportunities to prepare investors for the next phase of this economic cycle.
BONDS BENEFIT FROM FOUR-DECADE DISCOUNTS AND ELEVATED YIELDS
INNOVATION BROADENS GROWTH OPPORTUNITIES
Alternatives
In private credit, increased bank competition in larger markets is creating attractive opportunities in the middle market for investors seeking higher yields and total returns. After a dramatic reset in values in global real estate markets, investors can capitalize on attractive tactical opportunities and structural themes driving the new real estate cycle.
VOLATILITY TO BOOST TAX-BENEFIT OPPORTUNITIES
Investors with substantial gains after the recent equity rally seeking to mitigate volatility and enhance after-tax returns may benefit from direct indexing.
INFLATION PROTECTION FOR DC INVESTORS IS STILL MERITED
While inflation has subsided from its peak, it remains elevated, making incorporating real assets in portfolios a continued priority for retirement investors.
Alternative investments are not subject to the same regulatory requirements or governmental oversight as mutual funds. The sponsor or manager of any Alternative Investment may not be registered with any governmental agency. Alternative investments often engage in leverage and other investment practices that are extremely speculative and involve a high degree of risk. Such practices may increase the volatility of performance and the risk of investment loss, including the loss of the entire amount that is invested. Alternative investments may purchase instruments that are traded on exchanges located outside the United States that are “principal markets” and are subject to the risk that the counterparty will not perform with respect to contracts. Furthermore, since there is generally less government supervision and regulation of foreign exchanges, Alternative investments are also subject to the risk of the failure of the exchanges and there may be a higher risk of financial irregularities and/or lack of appropriate risk monitoring and controls. Past performance is not a guide to future performance and the value of Alternative investments and the income derived from them can go down as well as up. Future returns are not guaranteed and a loss of principal may occur. Alternative investments may impose significant fees, including incentive fees that are based upon a percentage of the realized and unrealized gains, and such fees may offset all or a significant portion of such alternative investment’s trading profits. Alternative investments are offered in reliance upon an exemption from registration under the Securities Act of 1933, as amended, for offers and sales of securities that do not involve a public offering. No public or other market is available or will develop. Similarly, interests in an alternative investment are highly illiquid and generally are not transferable without the consent of the sponsor, and applicable securities and tax laws will limit transfers. Alternative investments may themselves invest in instruments that may be highly illiquid and extremely difficult to value. This also may limit your ability to redeem or transfer your investment or delay receipt of redemption proceeds. Alternative investments are not required to provide their investors with periodic pricing or valuation information. There may be conflicts of interest between the alternative investment and other service providers, including the investment manager and sponsor of the alternative investment. Investors in alternative investments may have limited rights with respect to their investment interest, including limited voting rights and participation in the management of the alternative investment. Alternative Investments may involve complex tax and legal structures. Investment in any particular alternative investment, or alternative investments generally, is only suitable for sophisticated investors for whom such an investment does not constitute a complete investment program and who fully understand and are willing to assume the risks involved in such alternative investment. Investors are urged to consult with your own tax, accounting and legal advisers regarding any investment in any alternative investment. Investors are also urged to take appropriate advice regarding any applicable legal requirements and any applicable taxation and exchange control regulations in the country of their citizenship, residence or domicile which may be relevant to the subscription, purchase, holding, exchange, redemption, or disposal of any Alternative Investment.
The views expressed herein are those of investment professionals at PGIM Fixed Income, PGIM Private Capital, Jennison Associates LLC (“Jennison”), PGIM Real Estate, PGIM Custom Harvest, PGIM DC Solutions, and PGIM Investments at the time the comments were made and may not be reflective of their current opinions and are subject to change without notice. This commentary is not intended as an offer or solicitation with respect to the purchase or sale of any security or other financial instrument or any investment management services. This commentary does not constitute investment advice and should not be used as the basis for any investment decision. This commentary does not purport to provide any legal, tax, or accounting advice. PGIM Investments LLC is a registered investment advisor with the U.S. Securities and Exchange Commission. PGIM Custom Harvest does not provide tax, legal, or accounting advice. This material is for information purposes only, and is not intended to provide, and should not be relied on for tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction.
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