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Investing in the United States before the FED interest rate cut

28. May, 2024
Taglio dei tassi FED

How to take advantage of this great moment for those wishing to invest in the U.S. real estate market

While most people have become used to the current economic situation through news and insights, the prudent investors looking to invest in the United States knows that a context characterized by:

  • declining inflation
  • interest rates stuck at peaks in major developed countries
  • employment at its highest and unemployment at its lowest in many countries

cannot last long. We are therefore in an extraordinary moment that offers exceptional opportunities for those with liquidity to invest in the United States, just to make an example.

Rates at highs set to fall

The current interest rates are unique in recent decades. The most vigorous series of rate hikes by Central Banks (11 hikes by the FED from March 2022 to July 2023, with the rate currently at 5.25%-5.5%) was a belated attempt to counteract high inflation, initially labeled as “temporary,” which characterized the post-pandemic recovery.

The ECB has moved similarly (10 consecutive hikes with the rate currently at 4.5%-4%-4.75%) and the Bank of England (14 consecutive hikes with the rate currently at 5.25%). South American institutions-such as the Colombian Central Bank (current rate at 11.75% after reaching and holding for months at 13.25%) or the Brazilian Central Bank (current rate 10.50% after reaching and holding for months at 13.75%)-have already begun their descent.

On this point, the investment community—not just those looking to invest in the United States—agrees that the FED, ECB, and BoE will also cut their rates during 2024. Current interest rates are unsustainable for businesses and families that need to resort to loans and mortgages. The reason for this near-unanimity of traders is quite simple: after the post-pandemic surge, inflation, albeit slower than expected, is declining. Therefore, there is no reason for rates to remain high much longer.

The role of employment peak in the interest rateàinflation transmission belt

One of the most significant factors slowing down the decline of inflation (and therefore, of interest rates) is likely the peak employment in most countries. On the one hand, many families have an additional employed member, hence an extra income, or the number of employed individuals remains the same but with more working hours per month. On the other hand, given the lack of unemployed individuals, companies seeking to hire must offer higher wages to those willing to change jobs. In all cases, the dynamics just described lead to increased purchasing power, albeit reduced by inflation, which translates into consumption and counteracts the decline of inflation itself.

High rates and the real estate market

One of the most direct consequences of high interest rates is keeping a significant portion of families out of the real estate market. This in the U.S. housing market is “forcibly” holding down property values, which are bound to rise as rates are cut.

For those who wish to invest in the United States, all this means that we are at an extraordinarily attractive moment to purchase an income property. This investment, in fact:

  • provides excellent immediate rental yields (between 6% and 10% for most investment properties on this site), capable of significantly outperforming inflation (currently at 3.4% in the USA).
  • puts the investor in the best position to secure excellent capital gains as, with the lowering of rates in the coming years, more and more individuals and families enter the property market thanks to increasingly favorable mortgages.

Moreover, compared to investing through financial instruments on one hand or in safe-haven assets on the other, income properties are to be considered safe and yielding investments.

Invest in the United States with OPISAS before the rate cut

To take advantage of the opportunities of this extraordinary moment, invest in the United States in income properties with Opisas. Write to contact@opisas.com to make an appointment with an advisor who speaks your language.

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