Housing
I see the US housing market trying to find a floor, I can read the constructive homebuilder comments about cancellation rates normalising, the increased use of buydowns, and cautiously optimistic demand.
I can read the pundits / market commentators who point to all of the above, including anecdotes of occasionally desperate buyers, who are armed with the confidence of generational lows in the unemployment rate.
And then I just look at the mortgage rate with a 7 handle and say “nah”. That’s not going to work. Buying very cyclical assets at a time of very high mortgage rates / low affordability is usually a recipe for losing money.
We have some cyclical exposures on in the portfolio, companies like Lendlease, the big property developer, which is trading at very depressed valuations. We have Dexus, which has great assets, solid occupancy, and will probably muddle through the WFH impacts over time.
We have the banks, which are cyclical, geared beasts.
Now, the above are comments about US markets, and then comments about Australian equities. However, for us, the consideration is whether to add stocks like JHX or RWC or FBU to the portfolio.
And, given our existing exposures, they aren’t bets we really want to add to.
Plus, at the multi-asset fund level, we have a little over 6% of the portfolio in G-and-A-REITs already, so there’s a lot of rate sensitive/stable-housing-adjacent trades on, already.
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