Market | Portfolio update
07 | 2021
In July the rise of the delta variant and uneven progress in vaccinations deteriorated the prospects for the global economy somewhat.
Nevertheless, GDP figures in the U.S. and Europe came in better than expected. In Asia we saw a quite different picture. China and Hong Kong plunged on a regulatory crackdown by Chinese government announcement to curb big companies. Elsewhere, in Australia officials prolonged Sydney’s month-long lockdown by at least another four weeks to curb a delta strain outbreak. South Korea and Thailand posted record daily infections. Therefore, it is not surprising that equity markets in the U.S. and Europe had been the winners in July. The S&P 500 gained +2.29 percent followed by the Eurostoxx 50 which was up +0.75 percent. Asia was in the last place with the Nikkei index losing -4.19 percent.
Due to these development defensive sectors like real estate were most preferred in July. In all regions real estate markets significantly beat the broader markets. The EPRA Global REIT index gained +4.19 percent last month. Just for the second time this year North America was not the best performance contributor, it was Europe which took the seat. Europe was the best performing region with a gain of +6.88 percent, followed by North America with a gain of +4.83 percent, followed by Asia with +0.07 percent (all figures in EUR). The UK REIT index outperformed the European REIT Index by 1.7 percent and is now 370 basis points ahead year to date.
Our model portfolio ended July with a gain of +4.50 percent. So, the overall performance for the year so far summed up to +16.61 percent. It also realized +3.680 percent dividend yield so far this year (gross without withholding tax). In July, the catch up of retail stopped and lodging/resorts even dropped. The risk for retail is that underlying 2H rent may being cut even if collections rise, after being pared to sustainable levels and tenant failures raising vacancies. Best performing sector last month was industrial/logistics. Main reason for this positive development was the global rising demand for industrial goods. Additionally, the shock of supply-chain disruption is encouraging higher inventories for “just in case” security, adding space needs. An immense volume of home-deliveries strain last-mile facilities, yet the cost of transport makes it economic to pay up for convenient space. Therefore, we expect that the growth differences will persist, so we still prefer industrial/logistics over retail.
Still, all regions remain vulnerable to the course of the pandemic. The potential for the Delta variant to spread appears currently to be the most immediate threat and continues to add downside risks. Nevertheless, for the next months we expect a slightly further positive development.
Therefore, we are confident that our forecast of a dividend yield of 5.0 to 6.0 percent and a total return of 12 to 15 percent for 2021 will be reached and could be even higher.
Your contact persons
Dr. Thorsten Schilling
+49 69 50602 6700