How do you get out of this? The dream scenario that would balance the budget in about 12 years: Get nominal GDP growth of 6 to 7 percent, with a freeze on U.S. government spending, while keeping rates low.
Good luck with that.
And your new market leader is: real estate investment trusts (REITs). That's right: the MSCI REIT Index, a basket of REITs, is at a 4-year high. REITs are commercial real estate companies that own and invest in real estate on behalf of their investors.
What's going on? REITs have been the most direct beneficiaries of the Fed's policy of low interest rates. They have been able to refinance their debt at considerably lower rates. Relatively high dividend payouts of two to four percent also attract the dividend crowd.
But it's the improving fundamentals that are the key:
1) apartment rentals have been exceptionally strong, with rising rates and occupancy
2) high quality malls are recovering, with new retailers replacing older ones
3) business travel has improved hotel occupancy rates, though leisure travel is still lagging
The one area still lagging: suburban office space. There's just too much of it.
And your new laggard is: big-cap financials. Ever since earnings season began, all the big names have lagged and are doing so again: Morgan Stanley , Goldman Sachs , Citi , JPMorgan .Page 2 of 3 | Prev Page | Next Page