We hope you haven’t been duped by the headlines about an imminent collapse. The economy as a whole is fine.
We mean it.
This claim may sound counter intuitive.
But hopefully by the end of this article we will have convinced you.
We’ll look at three different charts.
Let’s dive in.
The Australian REITs give you a feel for the wider economy
If you don’t already know, a REIT is a real estate investment trust — and the ones you find on the ASX are a securitised way of investing in real estate portfolios.
They give you a chance to reap some of the rewards that are bundled up with land ownership.
The REIT leases space, collects rent and pays a dividend.
REITs are basically rent collectors. It’s handy to view the REITs from that angle.
Because movements in rent will reflect the health (or lack thereof), in the wider economy.
Improving rents can really only happen in an improving economy. And vice versa.
So, when you read the headlines out of the big outlets, you may get the impression that the economy is collapsing all around us.
But this is not what Australia’s stock market is suggesting.
Let us show you what we mean with a look at the charts of three major REITs.
Goodman Group leads the charge in industrial
The first chart I have for you is the chart of the biggest of the bunch, Goodman Group [ASX:GMG]. Here’s the monthly…
It’s never had more than three months down since the low in 2009. Every low has been a higher low. It tells you demand for industrial space is improving. The economy is unlikely to collapse, whilst this is the case. Despite what you read to the contrary during all that time.
Goodman Group operates 384 warehouses, logistics facilities and business/office parks and has $39.6 billion external assets under management.
In addition to its Australian properties, it has a global portfolio with assets in Europe and the UK, Brazil, the US and China. So it gives you a sense of the global perspective as well.
Dexus a mix of commercial, industrial and retail
Next up is Dexus Property Group [ASX:DXS].
Primarily involved with Australian commercial and industrial real estate, with a smattering of retail properties, Dexus directly owns $13.9 billion of office and industrial properties and has $15 billion of assets under management.
The chart for Dexus is similar to Goodman’s. It’s never made a lower monthly low for the last ten years. That’s telling you the economy is improving and the rents along with it.
And Mirvac gives you a view into residential real estate
The final piece of the puzzle is Mirvac Group [ASX:MGR], which has significant capital in residential, particularly in apartments. Indeed, around 30% of its earnings are derived from apartment sales.
Operating only in Australia, and with $18 billion of assets currently under management, Mirvac was tipped to underperform by UBS in late January.
They maintained a ‘sell’ rating.
Instead it has gone on a serious run…
Again, same story as the first two. Has never made a lower monthly low in the last decade. It tells the economy is improving along with the rents. And as for residential real estate. It looks okay from this angle.
Learn to read a chart. It’s a valuable skill to have. It will free you from all the nonsense you read.
See how broker ratings only misleads. The chart is giving you no reason to be selling there. None. It’s a higher low on the monthly chart. It’s trading against the trend.
And as we’ll show, stocks trend for a reason.
In February the Property Council of Australia reported this,
‘Melbourne’s CBD office vacancy hits ten year low; immediate action needed to address looming supply shortage.’
And in April the Australian Financial Review reported this,
‘Office rents on Melbourne’s St Kilda Road boulevard are surging to new highs as vacancy rates tumble and cost-conscious tenants seek alternatives to the pricey, tightly-held CBD office market.’
All these REITs (and many others) have been trending up strongly all last year. The market has already priced in this news long ago! Hence the solid upswing into this year.
The headlines you read in the press is old news to the market.
Of late, there has been a lot of news suggesting we’re headed for recession. That house prices and everything else is going to collapse all around us.
But his is not what Australia’s stock market charts are suggesting.
Best of luck (you make your own actually).
Terence Duffy & Lachlann Tierney
For Markets and Money