Publications

- March 1, 2019: Vol. 31, Number 3

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Real estate and reflation: How rising deficits and partisan gridlock may work in real estate’s favor

by William Pattison

Accelerating economic growth and a relatively muted supply pipeline have left real estate fundamentals in a good position, especially when compared with prior late-cycle points in time. Risks are growing, however, from rising government gridlock. One possible roadmap into the effects of the gridlock in Washington may be seen in the years following the 2010 election which, like today, resulted in a split Congress. For several years following 2010, legislation was slow to move, a government shutdown slowed economic growth, and U.S. Treasury debt was either put on negative watch or downgraded by the major rating agencies. Today, rising deficits and government dysfunction may leave the Federal Reserve in the unfortunate position of balancing its low-inflation mandate with the economic repercussions of potential further rating downgrades. This dynamic, as well as tariffs and a tight labor market, point toward potentially higher inflation during the remainder of 2019 and beyond. Portfolio

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