2021 The Benefits of Direct Real Estate

Contributors

Will McIntosh, Ph.D
Global Head of Research

Jay Johnston
Senior Associate, Research

Mark Fitzgerald, CFA, CAIA
Executive Director, Research

Karen Martinus
Senior Associate, Research

July 2021

Sound the Alarm! Inflation is Finally Here

In the wake of COVID-19, as the Federal Reserve undertook unprecedented stimulus measures, there has been a renewed focus among market participants on the prospect of inflation in the U.S. Notable value investor, Howard Marks, discussed inflation in his latest memo writing, “because the primary risk lies in the possibility of rising inflation and the higher interest rates that would bring, I think portfolios have to make allowances: even though we can’t predict, we should prepare.” He later postulates that investors should shy away from long-duration bonds and instead overweight assets that do well in an inflationary environment, like real estate where rent can be increased. Consistent with an economic regime change, portfolio positioning needs to be revisited in light of this renewed threat.