Macro Stabilization to Benefit Real Estate
PGIM Real Estate’s Rick Romano sees optimism for public REITs with rare buying opportunities as macro visibility improves and private asset values decline.
As higher rates weigh on cyclical growth, Mark Baribeau, CFA, Head of Global Equity at Jennison Associates, expects growth stocks capitalizing on secular trends to attract investor attention due to their ability to deliver standout results.
Optimism in the Wait-and-See Economy
The biggest macro impact investors are likely to see in 2023 will stem from the Fed being largely done, if not finished completely, with this tightening cycle. That's going to be the most important driver for equity markets going forward, and it appears we're near the end of the aggressive phase. Now the Fed needs to let the lagging effect of its rate increases take hold and reassess the situation as it evolves.
Fundamentals are better than growth stock prices might lead you to believe. Still, given lingering unknowns with potential to impact earnings, companies benefiting from structural demand unlikely to be disrupted by economic conditions appear well positioned for the environment ahead.
It is a very tricky environment, but opportunities are setting up because valuations have come way down and a lot of companies are doing quite well.
Big, Secular Trends Frame the Future
Electric vehicles represent one of the most promising areas of growth. This is a major opportunity because we’re seeing disruption in an industry that’s not used to disruption. And it’s not just the vehicles. It’s also the batteries, the battery supply chain, and the tie-in to alternative energy for producing electricity.
The luxury goods space also looks attractive. Amid inflation-driven pressure on mass-market spending, demand for luxury goods is much less price elastic. High-end spending patterns are robust around the world, which should be a good source of unique opportunities as overall growth moderates.
Finally, Latin America is underserved by the banking industry, creating opportunities for companies with innovative financial technology platforms to fill the void. Fintech companies are well positioned to serve customers with the kind of digital services that the legacy banks have been slow to offer in the region.
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The Macro Picture and Market Implications
Daleep Singh, Chief Global Economist at PGIM Fixed Income, looks forward to the Fed reversing course on interest rates as part of his global economic outlook.
Global Macro Offers a Versatile Vantage Point
PGIM Wadhwani’s Dr. Sushil Wadhwani, CBE, highlights how flexible strategies can provide investors targeted solutions when unfolding events raise new questions.
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