Monthly Briefing
Market | Portfolio update
01 | 2022
In January fears about the impacts of the omicron wave were mainly replaced by another topic called inflation.
Additionally, there are worries that international developments like China’s Zero COVID policies or an energy crisis from a military conflict between Russia and Ukraine will dampen down economic growth. Furthermore, investors are weighing policy-tightening expectations against the economic rebound, after the Fed endorsed interest-rate hikes in March and opened the door to more frequent, potentially larger hikes than expected thereafter.
As a result, all regions showed negative performance in January. Eurostoxx 50 came in with a loss of -2.74 percent followed by the S&P 500 with -3.76 percent and finally by the Nikkei Index, which was down -5.37 percent.
The REIT markets couldn’t escape this trend and followed the broader equity markets. The EPRA Global REIT index lost -5.03 percent last month. In January, it was Europe which was most resilient and down by only -1.70 percent. The other two main regions Asia and North America were close to each other but much worse than Europe. Asia lost -5.21 percent and North America -5.37 percent (all figures in EUR). The UK REIT index underperformed the European REIT Index by more than 1.0 percent last month.
Our model portfolio ended January with a decline of -4.00 percent. It also realized +0.26 percent dividend yield for the first month of 2022 (gross without withholding tax).
In the first month of the year, there was only one sector with positive performance: Healthcare. This was quite surprising, as all other sectors suffered from the prospect of more and higher interest rate hikes than originally expected. The hero of 2021, self-storage, came down most, followed closely by industrial. While for the first one can argue that this is mainly due to profit taking, industrial was hit by possible growth impacts due to the above-mentioned conflicts. For two other sectors, office and retail, the main topics were adaption speed and M&A. These two sectors face new strategic priorities in Covid’s aftermath as the world has learned to work and shop online. That means companies must adapt their portfolios. Additionally, mergers among REITs may receive new attention by their management to diversify from single asset classes as well as acquiring skills to develop and manage mixed-use properties. So, activities inside the REITs and between the REITs will pick up during the year to make themselves futureproof.
As uncertainties about inflation and the outcome of the conflict between Russia and Ukraine prevail for the moment, it’s too early to predict how these topics will impact the economic development during the next few weeks and months. Nevertheless, we are confident that our forecast of a dividend yield of 4.0 to 5.0 percent and a total return of 11 to 14 percent for 2022 will be reached.
Your contact persons
Dr. Thorsten Schilling
Thorsten.Schilling@deacapital.com
+49 69 50602 6700
