Powell Signals Rate Cut In Sep - Implications On REITs
Fed Chair Powell opens door for 50bps rate cut open.
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Last Friday, all eyes were on the quiet town of Jackson Hole, Wyoming, as financial market participants eagerly awaited the highly anticipated speech from Federal Reserve Chair Jerome Powell. This annual economic symposium, hosted by the Kansas City Federal Reserve, is closely watched by investors around the world, as it often sets the tone for the months ahead. Powell's remarks on the state of the U.S. economy and the potential path of future interest rate adjustments sent a clear signal that has significant implications for investors.
What's Happening?
In his speech, Powell conveyed a somewhat cautious outlook, particularly when it came to employment data and the potential for further rate hikes. This more dovish stance than what many had expected sent an immediate ripple through the markets, with the U.S. Dollar Index (DXY) dipping in the aftermath of Powell's comments.
The key takeaway was the suggestion that the Federal Reserve may be nearing the end of its current interest rate hiking cycle. After a series of aggressive rate increases over the past year to combat stubbornly high inflation, the tone from the Fed chair seemed to indicate a potential pause or slowdown in future rate hikes.
Why Does it Matter?
This shift in stance was interpreted by many market participants as a sign that the central bank is starting to feel more comfortable with the current level of interest rates and their impact on the economy. The idea is that further significant rate hikes may no longer be necessary, at least for the time being.
Almost all S-REITs are in green this morning, up 2% on average. During the high interest rate environment past few years, REITs have not been performing well, with distribution per unit (DPU) stagnant or going down due to the impact of higher borrowing costs. As Powell has signaled a potential rate cut in September, we might start seeing a turnaround for Singapore REITs (S-REITs).
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Disclaimer: This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any form. Please do your own research and seek advice from a qualified financial advisor. From time to time, I have positions in all or some of the mentioned stocks when publishing this article. This is a disclosure - not a recommendation to buy or sell stocks.