It might not feel like a recession, but there is real consumer pain as real incomes have fallen significantly this year.
Despite the Fed’s very rapid and substantial tightening, the U.S. economy seems to be rather resilient and certainly doesn’t feel like it’s in recession — at least not yet, Kristina Hooper, chief global market strategist for Invesco, wrote in a recent insight.
“The reality is, as Fed Chair Jay Powell recently acknowledged, that much of the Fed’s tightening has yet to turn up in economic data — there is a lag, of course,” Hooper wrote. “So it’s only a matter of time before we see more signs of a slowdown in the jobs reports and elsewhere. At the risk of sounding like a broken record, the Fed’s actions will largely dictate just how significant the slowdown is.”
Hooper said there will likely be more market volatility, especially given heightened geopolitical tensions and the potential for downward earnings revisions.
“I believe the best we can do as investors is maintain a long-term perspective,” Hooper wrote. “That means being well diversified across equities, fixed income and alternatives — and being tactically opportunistic if comfortable.”
Investors looking for ways to further diversify their portfolios should consider adding real estate exposure, such as the Invesco KBW Premium Yield Equity REIT ETF (KBWY).
The $297 million fund offers exposure to the real estate industry within the U.S. equity markets, an asset class that is overlooked by many investors.
KBWY follows the KBW Premium Yield Equity REIT Index, which is constructed using a dividend yield-weighted methodology that seeks to reflect the performance of approximately 24–40 small- and mid-cap equity REITs in the U.S., according to VettaFi.
Real estate has historically been embraced because of its ability to deliver excess returns during bull markets and its low correlation with traditional stock and bond investments. REITs might appeal to investors seeking current income, as these trusts must distribute at least 90% of their income to investors, and offer an efficient way for investors to gain indirect exposure to real estate prices (as opposed to direct exposure gained through ownership of a residential property), according to VettaFi.
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