US Real Estate - Outlook 2019

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We expect the Base Case to be the most likely outcome. In a quick summary of the Base Case assumptions, positive Gross Domestic Product (GDP) growth, a strong labor market and moderate inflation persist. Interest rates move up gradually, leaving the yield curve flat and real estate spreads condensed. The Federal Reserve (Fed) continues raising interest rates on
the short end of the curve and selling Treasury bonds on the long end of the curve. Federal government deficit rises to USD
1 trillion in 2019, 5% of GDP, which grabs headlines but does not add downward pressure to growth until 2020. Energy prices remain low and stimulative. Tariffs do not interrupt growth in the US. In Asian economics growth is already lower and should continue decelerating. Brexit goes smoothly, meaning the UK stays in the custom union for goods, and negotiates free-trade deal for services and free flow of skilled workers. Initial boosts from tax policy changes fade and slower global growth leaves economic growth in 2019 slower than 2018.

 

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