As widely expected, The Federal Reserve, raised rates by 25 basis points to 1.75% last week, while maintaining its forecast for three rate hikes total for 2018. Even as the Fed upgraded its outlook for the economy, it expects near term inflation in 2018 to remain benign, with both core and headline inflation projection coming in at 1.9%.
The news was largely shrugged off in terms of its impact on REITs with the FTSE S-REIT Index down a marginal -0.2% the day after the rate hike. Nonetheless, since the turn of the year, the S-REIT sector looks to be pricing in some of these headwinds from the macro front this year, with the FTSREI down -5.4% YTD vs the STI’s +0.1%. We highlight some of the queries investors may have at this juncture in face of the impending further rate hikes.
1. The Fed just raised rates for the first time in 2018, and signaled for another two for 2018. What are the implications on the S-REIT sector?
Figure 1: Expectations of a fourth rate hike fell after the announcement of the first rate hike in 2018, on 21 March this year
3. What is the outlook for each S-REIT sector?