SREITs Maybe Overvalued Despite Jumbo Size Interest Rate Cut of 0.5% By Powell.

Wow, what a BIG surprise! The conservative Uncle Powell has finally announced not just a cut in US Federal Reserve rate but a giant size 0.5%. Current US rates now hovers at 4.75% to 5.0%. This is higher than what I was expecting. But still, the recent SREIT price rally maybe overdone. US interest rates will not fall back to the close to 0% in the past unless the US economy crash due to a severe recession. 

Assuming an eventual near term US Fed rate of 3.5% at equilibrium to fight against inflation and also to ensure adequate economy growth stimulation, returns from REITs required for most folks should be at least another 2.5% to compensate for equity risk of holding onto financially strong ones like Mapletree Industrial Trust ("MIT") and Capitaland Ascendas that are linked to Temasek. This will translate to an expected yield of 6.0%. MIT is now trading at 5.3% distribution yield as at 18 September 2024.

While I am still holding on to the SREITs in my current cash and margin portfolios, I have began selling off part of my CPF OA investments in MIT to lock in the recovery and the resultant capital gains at the S$2.50+ range.