In This Economy, A Creative Portfolio Is Key

JPMorgan, one of the world’s largest financial institutions and a bellwether within the bubble of equity markets announced a 42% dip in first-quarter profits as economic uncertainties escalate from soaring inflation and Russia’s Ukraine invasion.

This news comes as a huge disappointment to many investors, especially since the bank reported record earnings after the Fed-backed liquidity injections of 2021. Ah, to be back in the comfort of a COVID economy.

Unfortunately, this year we’re seeing investment banking revenues decline amid a surge of volatility in equity markets. JP Morgan also spent the tail end of 2021 funneling $902 million in reserves to cover potential loan losses in the event pandemic-pummeled customers can’t cover their debt.

The bank’s Chief Executive, Jamie Dimon, now warns of economic uncertainties on the heels of our recent geopolitical troubles.

From Reuters:

“Inflation and Ukraine are powerful forces that threaten the economy,” Dimon said on a call with media, underscoring a change in his bullish outlook for the U.S. economy.

“The Fed needs to try to manage this economy and try to get to a soft landing, if possible. There is almost no chance you won’t have volatile markets, that can be good or bad. But I think people should be prepared for that,” he said.

Pressed on whether the U.S. could face a recession, Dimon said: “I am not predicting a recession. Is it possible? Absolutely.”

There you have it. One of the world’s biggest banks could merely be the first domino in a line of fiscal destruction destined to put our post-pandemic economy in peril. JPMorgan is the first to report on earnings this quarter and we have yet run the numbers on Goldman Sachs, Morgan Stanley, Bank of America, etc.

So what does this mean to your bank book? Well, it could be the wake-up call we all need to get creative and begin diversifying our assets – and I’m not talking about splitting your portfolio between ETFs and the top movers in today’s tech stocks. Sure, the classic ways of the Wall Street crowd were once the standard in securing a little asset appreciation, but that could soon be a thing of the past.

Commodities markets, cryptocurrency, and yes REITs could be the recession-proofing your portfolio needs to make it through the volatility of the next few years. In other words, when it comes to the sanctity of your economic security, it’s time to start thinking outside of the box.

Other Non-REIT News to Know About

Jobless Claims Rise but Labor Market Remains Squeezed.

The U.S. Labor Department announced Thursday that initial jobless benefit claims rose 18,000 to 185,000 last week. In the weeks prior to this, claims had matched a 54-year low.

In a new poll by The Wall Street Journal, economists had estimated new claims would rise to 172,000 while U.S. Treasury Secretary Janet Yellen, a labor-market expert in her own right, commented that by many accounts, the U.S. labor market is as tight right now as it’s been in her lifetime.

So where does this leave us? Well, it seems too soon to be certain but we’re obviously still reeling from the ramifications of covid stimulus and the residual effects of The Great Resignation, and with the labor market tight as a drum, wage demands will continue to rise and inflation will follow suit.

The World According to REITs

Speaking of getting creative in the face of inflation, here are three REITs that experts at Yahoo! Finance have picked to help ebb the effects of inflation and give you a little more return outside of equity markets.

CubeSmart (NYSE: CUBE) Self-Storage properties usually have monthly leases, allowing management to react swiftly to cost increases and market flux. When it comes to these mass storage solution REITs, CubeSmart puts up some pretty impressive numbers in terms of both occupancy growth and inflation resilience.

While the consumer price index climbed a staggering 7% in 2021, CubeSmart’s full-year 2021 same property net operating income shot up 17.2% on rental rate and occupancy gains. The company’s core fund from operations also climbed 23% for the year to $2.12 per share.

VICI Properties (NYSE: VICI): Vici Properties is a REIT specializing in casino properties, based in New York City. This gaming trust has become a great bet of its own since hitting the market in late 2017. The company recently bought the world-famous Venetian Las Vegas and is now vying to acquire MGM.

1st Streit Office: This one is a bit of a sleeper. This public, non-traded REIT offered through the Streitwise platform has a share price tied directly to its net asset value (NAV).

Since its shares aren’t traded on the Wall Street exchanges, a market selloff has basically no effect on the value, insulating it from market downturns and the effects of high inflation.

And for all those wondering, I am long VICI.

Brad Thomas is the Editor of the Forbes Real Estate Investor.

Disclaimer: This article is intended to provide information to interested parties. As ...

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