Q3 2021 APAM MARKET COMMENTARY

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APAM Q3 INVESTMENT MARKET SUMMARY – OUR KEY TAKEAWAYS

We highlight our concerns over potential contagion on the Global Economy from a Chinese meltdown, although we are more optimistic on the underlying strength of the UK economy despite current supply chain issues and spiralling energy costs.

All markets are having to gauge the impact of price inflation and future rises in interest rates against a backdrop of sovereign indebtedness.

In this environment real assets may well be favoured as equities look increasingly vulnerable to a shock correction and bond yields are creeping upwards. Leading indicators of M&A activity and narrowing discounts in the REIT sector imply value in UK real assets.

Retail looks to be ‘bottoming out’ with double digit yields for shopping centres encouraging renewed interest from opportunistic investors.

Offices should add value despite questions over workers returning to the office impacting future demand. Attracting talent to the workplace will drive demand for Grade A and push rents as occupational property costs remain a fraction of wage bills.

Industry (logistics) remains ‘too hot to handle’ particularly as the economics of global supply chains are in question and the ‘just in time’ economy falters. Consciousness about our impact on the environment will also question the impact of large-scale distribution systems.

House price inflation, despite the threat of rising interest rates, continues to entice residential investment capital as Build to Rent, Student Accommodation and Multi-family investors compete for limited supply.

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