Hines Global CIO talks real estate, Boston Fed president: Asking for a Trend

On today's episode of Asking for a Trend, host Josh Lipton takes a comprehensive look into financial markets (^DJI, ^IXIC, ^GSPC).

Kicking off the show, Hines Global Chief Investment Officer David Steinbach joins the discussion to delve into the ongoing shift within the global real estate market. Steinbach characterizes the current landscape as "a different sport" compared to previous years.

Next, Yahoo Finance's Jared Blikre joins the show to break down the top trading takeaways of the day. As the S&P 500 (^GSPC) and Nasdaq (^IXIC) hit new record closes, Blikre provides insights into market dynamics fueling this rise.

Rounding out the episode, Yahoo Finance's Julie Hyman analyzes the growing bullishness among fund managers regarding market dynamics. Hyman sheds light on the sentiment data, revealing that bullishness has reached its highest level since November 2021.

Lastly, Federal Reserve Bank of Boston President and CEO Susan M. Collins speaks with Jennifer Schonberger about her outlook on potential rate cut scenarios in an exclusive interview.

This post was written by Angel Smith

Video transcript

Hello and welcome to asking for a trend.

I'm Josh Lipton for the next half hour.

We're going to be breaking down the trends of today that will move stocks tomorrow.

There's a lot to keep track of.

So we're focusing on what you need to know to get ahead of the curve.

Here are some of the trends we're going to be diving into.

There is a new top name on Wall Street, NVIDIA Eclipsing Microsoft today to become the most valuable public company continuing its run.

After surpassing Apple's market.

Earlier this month, the surging stock helped bring the S and P 500 to another record.

As A I.

Enthusiasm shows no signs of slowing down.

Plus another crack in the consumer weaker than expected retail sales hinting at a possible economic slowdown and bolstering the timeline for rate cuts from the fed.

We hear from Boston fed, President Susan Collins at 4:40 p.m. today in an exclusive interview and in the meantime, those higher for longer rates have been placing pressure on the real estate market and that is where we begin to date real estate capital markets face a period of uncertainty as central banks move at different speeds with interest rates, commercial real estate fear index has remained elevated throughout March, not yet following the broader, broader capital markets improvement, but real estate investment manager, Heinz says there's clear opportunities emerging across sectors.

Joining us here to discuss is Heinz Global Chief Investment Officer David Steinbach.

David, good to see you.

Good to see you.

So you said something interesting.

Um in a recent interview, David, you, you were talking about real estate investing and I heard you say in this interview, you know, it, it used to be kind of like downhill skiing and now it's more like cross country skiing.

What did you mean by that?

Yeah, I mean, look, we've had 40 years of one interest rate environment and that was um rates were steadily going down for 4040 years.

And, you know, the entire financial industry uh worked itself around that dynamic, right?

And uh a lot of ways of working uh got deeply embedded in terms of how we finance, how we create capital stacks, how we create value and frankly what the scarce resources um and um downhill skiing to me is uh moving quickly, right?

It's a bit of adrenaline speed, having money fast like that.

Now, now cross country, more work and more work.

And it's a shift from beta to alpha sweating a little bit.

Right.

Right.

It's a shift of beta from alpha beta to alpha.

And I think in that world it's about creating income.

It's about the hard work of execution and it's a different sport.

Um, it's, it's a winnable sport but it's a different sport.

I wanna dive into one sector, CRE commercial real estate.

Often.

When we talk about that sector, David on this show, it's almost like I talked about, like, in hushed tones.

Like, it's like empty buildings, empty downtowns, you know, no one's going back to work post pandemic.

It's you, is that what you see?

No.

Um, it's, there is, there, there are, there are buildings that don't work anymore and certainly there are specific office buildings that, you know, are probably gonna be torn down or, or find a new purpose.

Um That, that is true.

What's also true is, um, the best buildings are performing quite well and, and there is a real disconnect right now.

Are there certain regions or cities where you see better performance well, within?

Well, certainly, certainly there are some geographies with that better than others.

Um And certainly in a global context, uh, office is very different in Europe and Asia as it is in the United States.

And so there's a lot of diversity there, you have to understand, but even within a city, it really matters about not only the location but the quality and real estate is becoming more of a service.

And so it's about what you're doing for the customer, the tenant that really is moving the needle now more than ever.

So, it's essential you would sort of push back then because you'll sometimes see this story.

Listen, things are just, they're different.

Downtowns aren't gonna bounce back you, it seems like you're kind of pushing back on that a bit.

Yeah, I mean, uh, look, it, there, there are, um, there are areas that again are struggling but the, the downtowns, particularly downtowns that really activate multiple uses in terms of, of how they're bringing people in to them.

Those are going to outperform.

Uh Certainly transit things like that, that we all knew before are, are resonating.

Still, I think the real opportunity is for owners um to really think differently about how to play the game differently in terms of the sport and how can they uniquely solve our, the the customer's needs.

Um And do that in the context of the built environment.

I wanna get you out here on this, David quickly, we've stayed very us focused in this conversation, but you guys are global.

So internationally, is there a market that excites you the most?

Is it, you know, Europe, China, India.

So we're in 30 countries, about 380 cities around the world.

Uh So have a very global perspective on what's happening right now in real estate and uh we're deploying capital um all across the world.

Um Last year is about a third, Asia, third us, third Europe, for us, Europe definitely led the, the, the downward trail and has repriced the soonest.

Uh we're pretty active in Asia um within that, you know, Japan and Australia in very different places.

China, we've had a business a long time.

We've been much more focused on India.

Um The last, why, why, why India it's, it's chasing demand.

And so a lot of the demand that we are um serving is, has, has expand, there's a lot of expansion plans have been happening.

So that's been a a trend to watch.

Um And here in the United States, I think is the deal activity is gonna pick up significantly.

I think credit is gonna lead.

Uh equity will follow right behind that.

And um and certainly, I think right now in Multifamily, it is uh materially different than it was a year ago.

Um Retail is another sector that we are very interested in.

Uh The winners and losers have been sorted and the best office is something that is going to look very different in a year.

Uh I think it, it's been oversold in terms of how capital markets are pricing.

All right, bring a little optimism to the show today, David.

Thank you so much.

Appreciate it coming up this Thursday.

It's the latest episode of lead this way.

Here's a sneak peek as Madison Mills gets a closer look at the next A I revolution in health care.

The use of A I and health care has long been contested with fears about data privacy.

Bias and even ethical concerns about hindering doctor, patient relationships.

Doctor Angela Shippey, medical doctor turned physician executive at Amazon Web Services is hoping to make A I adoption a positive for patients and providers.

Can you imagine that you go to your doctor's office and instead of having the interaction be about saying, did you get this test?

Did you have that tests?

What other specialists have you seen?

All of that's been summarized and is right there in front.

So then the interaction is more about you saying I see that you've had the following.

It looks like you've already had the radiographic imaging that you may need.

You've already had the lab test.

Now, let's talk about what the next step is.

So that interaction is more again looking at each other and having true dialogue about what's next in your diagnosis.

And now over to our very own Jennifer Schonberger for an exclusive interview, Jennifer Josh, I'm here in Massachusetts, which is about 45 minutes north of Boston where I have spent the day shadowing Boston fed President Susan Collins as she gathers information first hand on the ground about the economy, talking to local businesses, banks, community developers, all information that she will use in her decision making when it comes to setting interest rates.

Susan, thank you so much for letting me tag along with you today for sitting down with me.

It's been great to be with you, Laura.

It's really a pleasure.

I'm glad you could join us.

What did you take away from your conversations today on the ground?

And how is that informing your outlook for the economy?

Yeah, and it, it's wonderful to be able to meet with so many different stakeholders from around our community.

This is something that I think is really essential to understanding what's actually happening on the ground.

Um You know, it complements the data that we look at and the analysis and modeling that we did.

And one of my key takeaways was really understanding some of the challenges that the um higher inflation that we had endured um is creating especially for smaller businesses.

And uh the fact that labor markets are actually uh coming uh improving.

Um it's getting easier for people to hire and there's much less turnover.

And so hearing uh from people who are on the ground firsthand, smaller businesses and larger businesses and community leaders has just been extremely informative.

I do want to follow up on inflation and what you learned today.

But first on the economy, given what you heard today in the comments from local businesses, how was that lining up with some of the cooler data that we got in terms of first quarter GDP.

On account of slower consumer spending, we got a retail sales number this morning is a bit more tepid signs of some cooling in the job market.

How are those two lining up?

So I think what we're seeing, I, I think they actually line up quite well.

What I see in the, um, statistical data is certainly evidence that the economy is coming into better balance.

There's been some slowing in demand, but an economy that's still solid, but it's still quite mixed.

There are differences across sectors, there are differences across regions and what I heard today, it's very consistent with that in the sense of um, some firms that are still seeing quite strong demand and others where they are seeing uh consumers being um you know, a bit more cautious in terms of their spending.

And, and so to me that aligns quite well, so the soft landing still in place.

Well, I continue to be that realistic, optimist, optimistic that gonna bring that inflation down, but we're gonna do it amid a labor market that stays quite healthy and um you know, lots of uncertainty around that.

But I still see that possibility as being uh very much the path that I believe and hope we're on on inflation.

You said previously that you think it's gonna take longer than thought for inhalation to come back sustainably to 2% given the information that you glean today on the ground in conjunction with some of the more official data that we've gotten at the start of the second quarter, uh namely that cooler than expected reading on May CP I expectations for a softer P ce are you still maintaining that view or do you think we will see inflation come down faster as we go through the summer months?

I think that it's gonna take some time.

I think what we've seen in the data and again, consistent with what I heard on the ground uh today is things are very volatile.

Um You know, you get some welcome news and then they're challenging news.

And so I think it's really important not to overreact to what has been encouraging.

I think the data that we have seen recently in terms of CP I, in terms of the producer prices um is consistent with an economy that in an orderly way is becoming better aligned.

Um But we also first quarter saw uh news that was more disappointing and the inflation numbers in particular, but other data as well, those monthly numbers are really volatile, the volatility is still quite elevated.

And so I do think we have to be patient because um one of the things I heard firsthand is how important it is for us to return to a sustainably low and stable inflation.

Um it matters for people and we wanna make sure that we uh really stay the course.

So from this point forward, do you think it's gonna be more volatile?

Perhaps the AC P I number that we saw was a bit of an anomaly.

Do you think we will see progressive cooling from here?

And you know, we saw three quarters of inflation data that was higher than expected.

Zapping your confidence would three months of lower inflation, data restore that confidence.

So I think it has been volatile.

I don't know that I expect it to become more volatile, but I think what we've seen is continued volatility relative to before the pandemic.

And I think we're going to have to let the data really tell us when it's clear that we're sustainably on a path.

And that means looking at a wide range of data, I'd like to talk about a constellation.

There are lots of different pieces of information that I think it's important to come together.

And you know, I do three months of lower inflation data, restore your confidence.

That would help.

And I would say, um you know, at looking after the uh very positive disinflation with strong activity at the in the second half of 2023 I still needed more confidence at that stage.

And so I do think that it will be important to see more information that is consistent.

We don't have to get all the way back down.

But I do think that for example, um some components are likely to take more time.

I think shelter inflation is likely to take more time.

I think services, other services, we've seen some good news, but um I think there's some parts to that, that we're just gonna have to patient.

So given what you just said, does it is September too premature to think about cutting rates.

Are we looking at something later in the year?

More like November, December?

I think we're gonna have to let the data tell us.

So it seems to me that there are very plausible scenarios um where we, um you know, later in the year, it would be appropriate if we see strong continued good news on inflation and an economy that is aligning.

Um That sounds like November, December.

Well, uh you know, I think that we need to see.

So again, I am I'm not going, I think we have learned that um there's no crystal ball that there's no preset path.

We have to let the data tell us and it's not one or two indicators.

It's looking more holistically at the information.

Are you looking at one or two rate cuts at this point?

Given where things are?

I could imagine scenarios that would be consistent with both.

I mean, I think that as I look forward, um my view of how much easing might be appropriate this year has uh been reduced as I looked at the data and that's consistent with the summary of economic projections that um all of the participants um put forward last uh last week.

And so I think one way to think about that is that there are different scenarios that might be plausible in terms of what sounds like.

Well, I think we'll have to let the day tell us before I let you go.

What's the risk that in the quest to gain confidence that inflation is dropping, sustainably back to 2% that you hold rates at current levels so long that you sow the seeds of a recession.

So the risks are absolutely two sided and both sides of our mandate are top of mind for me.

So I do think that there is a risk that if we held too long, we would see more slow down than we need.

And that's something that I watch carefully, you know, II I think that labor markets are still strong.

I think they are not overheated the way that I would have described them earlier.

But continuing to watch what's happened across a range of indicators in that space is also important in terms of the timing that will be appropriate to change the stance.

So it was balancing the risks of prematurely easing and it would be, you know, if, if we prematurely ease, we're just gonna make it that much harder to do the work we need to do.

But to your point, we certainly don't want to wait too long.

And so it's a risk calculation all Susan, we're gonna have to leave the live portion of this interview uh here for now.

But thank you so much for your insight.

Uh We're gonna continue this conversation on tape and we will have more for you on that, this Friday, Josh, I'll send it back to you in New York.

Thank you, Jennifer, the S and P 500 NASDAQ notched new record highs extending the rally while NVIDIA surpasses Microsoft to become the most valuable public company.

Yahoo Finance's Jared Blicker joins us here with more on the trading day takeaways.

Jared.

You know, today is uh the global Fund manager survey as published by the Bank of America and this is something I look forward to every month.

Lot of great charts out of it.

You get a feel for what uh asset manager they have two thirds of a trillion dollars under management.

So these are some big names in here and as a group, they can kind of, you get a sense of where things are going and when the herd gets to one extreme, well, you can do the opposite.

That's what Bank of America recognizes here.

So my takeaway number one is Wall Street is quadrupling down on the mag seven trade and I'm not saying doubling or tripling down, they're quadrupling down.

Um You can see 69% are saying long magnificent 7 69% is a big number.

In fact, when you get into the seventies, this is sounding like the 20 twenties when long tech was also the most crowded trade.

So I point out that consideration because what happened after that we had another boom year in 21 then we had that huge huge bear market in 2022 where we saw gains just evaporated.

So all of this crowding sets up the potential, not necessarily, but the potential for some downside there in those days.

And so we were talking here, it kind of feature that hot theme we're talking about now, which is like, yes, we have a rally but it's been narrow, really led by big tech and kind of, you know, outperforming everybody else.

Yeah.

And to be fair, uh, most rallies historically are crowded trades, but this one is just a little bit more crowded than usual.

And so we're paying attention to that.

Now, my second point here is com commercial real estate concerns.

They are rising and this is something, this is a long phenomenon.

You were just telling me about a conversation you were having with a guest.

Uh This is uh this is gonna take a long time to play out because that's the way these leases are structured.

They're usually over 10 years.

But here's a chart that shows when we're, when we're thinking about systemic uh systemic uh credit events.

And that's something that affects the entire investment sphere, sphere in the world, commercial real estate.

34%.

That's a pretty big number.

And remember shadow banking from the global financial crisis.

Well, that's still at 22%.

You know, you have all these uh subprime auto loans that are being foisted on, you know, to uh through the A BS system, uh US government debt.

That's another one the rates have been variable and also volatile and that can spill over into other things.

China real estate.

That's kind of a echo of us, commercial real estate but not, it's actually a completely different problem and the yen just surfacing here.

So that big problem they have over in the bank of Japan where they are looking to increase rates.

Well, it was interesting though because we were, we were talking about um David Steinbach from Heinz on the show and he was, he was, we had to discuss about CRE now, I would say he said in generally more, you know, positive.

I, I guess his only point was, you know, when he does his work, his firm does the work.

You don't, it's kind of dangerous to do like a paint, a broad brush.

In other words, he says there's such differences downtown and downtown building to building.

Exactly right.

We gotta move on here.

I think uh Broadcom, this is my third takeaway.

We talk about chip stocks and video, the biggest stock in the solar system.

But Broadcom is actually outperforming NVIDIA over this seven day rally and it's been a massive seven day rally.

But let me just sort by performance.

Here we go.

A VGO that's broad cam of 28% then arm right there, neck and neck.

Uh S MC I, we got Sky works.

We got Mikron gotta go down the list.

NVIDIA is on the second row but I will say this.

I'm gonna close with this.

I'm gonna show our NASDAQ 100 heat map where NVIDIA is in that number one spot to close the day.

Stacy Rascon from Bernstein calls Broadcom.

One of the best A I stories in the industry.

That's interesting.

Tail bowled up bold conversation about that.

But I know we don't have time, Jared.

Thank you, my friend.

Appreciate it more.

Asking for a trend on the other side.

B of a security is global Fund Manager survey.

Sentiment is the most bullish since November 2021.

Yahoo Finance's Julie Hyman joins me now with a closer look.

Yeah, this is our chart of the day here today.

You just heard Jared talking about this Fund Manager survey which is closely watched by us here.

Um, and basically you've got the sentiment right about here.

You can see that it does.

I mean, this is a long term chart going back to 2001 and you can see that sentiment does tend to swing between streams.

It is the highest that it has been in quite some time, but it is not yet at an extreme.

According to Bank of America.

They measure this by looking at the sentiment from their fund manager survey.

They also look at things like cash levels, equity allocation and economic growth expectations.

And they're saying your global risk sentiment is not yet extreme.

So that's something that is positive because it's in extremes when you see sort of snap backs uh potentially in the market here.

So if you look at this chart just to give a little context down here when the sentiment was quite low is when we saw the collapse of Silicon Valley Bank.

So just a little bit of uh context there for some of the swings uh that we see in this, in addition to uh Bank of America say, bringing us this chart, some of the, again, the color behind us here, 73% of their respondents to their survey say they see no recession right now, especially when you look over the next 12 months.

And that soft landing is sort of the consensus here.

And that hard landing expectations are at new lows.

Also just 8% say that there will be no rate cuts for the next 12 months.

So most people are looking for a rate cut.

In fact, 39% in the survey said they expect the first cut to come in September.

So that's sort of the backdrop for this bullishness that we are seeing here low expectations for a recession and expectations for the fed to begin cutting rates.

And also, as you talked to Jared about still some optimism here around large cap tech and earnings performing in that particular, um, arena.

Back to you, Josh Julie Hyman.

Thank you.

And that is a wrap on today's asking for a trend.

Be sure to come back Thursday.

At 4:30 p.m. Eastern for all the latest market moving stories affecting your wallet.

Have a great night.