Whichever way things are going, they’ll go a long way.
Inflation was rediscovered in September. Up to that date the quoted REIT sector had risen 25%, rebounding as the economy re-opened against a rise in the All Share Index of less than half that. I’ve been pretty bullish on the sector all year, believing it offered ‘something for everyone’ in terms of long-income inflation-linked income from what we call new generation REITs, a booming logistics sector, potential recovery in the London office market, maybe a nadir in retail and corporate activity which has seen five companies exit the sector this year.
Then inflation loomed on the horizon and the sector has given up just a little of its easy-won gains. Share price reaction though, has been rather curious. One would have thought that the new generation REITs would have benefitted most from rising inflationary prospects, but that hasn’t been the case, far from it. The best performers have been sheds, both in the shape of logistics-owning companies and above all the self-storage businesses, both of which categories were already on pretty demanding ratings. Growth out performing value yet again.
“By the time you read this, it’s highly likely that interest rates will have been raised for the first time since the GFC”
Along with the doubtless sacking of more Premier League football managers, by the time you read this, it’s highly likely that interest rates will have been raised for the first time since the GFC and the market is discounting an eventual rise to 1% next year compared to inflation on the CPI index, peaking at over 4% imminently before returning to the B of E’s remit range of c 2% by the end of next year. I’m not so sure. I have one mantra when it comes to interest rates: namely that they always move further in whichever direction they are travelling than anyone forecasts at the outset.
