Picking Winners And Losers
Governments around the world are intervening in the economy more than at any time in recent memory. It’s happening through tariffs, tax codes changes and even Twitter. The more government is in the business of picking winners and losers, the more uncertainty investors generally feel, and that usually hurts investments.
Not all sectors are equally vulnerable. New tariffs raise the costs of production across American industry, disrupting global supply chains. Foreign retaliation means exposure for export businesses. On the more overtly political side, Twitter callouts can provoke surges of consumer reaction that upend marketing strategies.
In this time of rising uncertainty and risk, I feel fortunate. Alliance is well positioned for the leases real estate to strong businesses that provide needed local services, like medical care. Those services can’t be outsourced or imported, and they’re necessary, even in bad times. Since we sell to other businesses, we’re insulated from the waves of emotion that can rapidly sweep through consumer communities. In short, we operate in a quiet harbor, mostly sheltered from the increasing winds of political risk.
Some governmental interference looks good at first, but hides longer-term risk. Just last week, a major pharmaceutical company agreed to roll back price hikes after coming under fire from the President. Many people may cheer a reduction in drug prices, but targeting a specific company for criticism has dangerous implications. Markets harness the wisdom of millions of people to choose winners and losers. Governments can’t do this as well. As investment risks change, commercial real estate is relatively protected. With less exposure to changes in international trade and consumer whims, it’s a great way to diversify an exposed portfolio. Alliance can help with that.
