U.S. presidential election uncertainty ended earlier this month when Donald Trump secured a comeback term with strong popular support. While the outcome of the U.S. election answered the key question of who will be in power, it also created uncertainties about the implications of a second Trump presidency and a Republican Congress for investors. Here are our observations related to listed real asset investing, including where we see attractive investment opportunities over the next four years and beyond.

The macro environment remains supportive of listed real assets. Rate-sensitive sectors, such as utilities and communications, came under pressure in the immediate aftermath of the U.S. election, as markets anticipated higher-for-longer rates and 10-Year U.S. Treasury yields moved swiftly higher. However, Treasuries recovered within days as the U.S. Federal Reserve again cut rates and Fed Chair Jerome Powell said the interest rate outlook remains unchanged. We’ve seen a similar playbook before. Yields rose leading up to and following the 2016 election as investors anticipated higher rates and inflation; then, a good portion of that selloff retraced in the subsequent quarters. It is important to understand the nature of the current selloff in yields. Since the recent low in mid-September, two-thirds of the rise in 10-year yields has been in real rates, not inflation expectations. We are simply witnessing a re-rating of growth. Indeed, the U.S. election has not changed the supportive macro backdrop of inflation easing in most regions, central banks globally lowering rates, and liquidity returning to the markets.

Energy infrastructure (or midstream) should benefit, while outsized concerns around the climate transition appear misplaced. The midstream sector is likely to benefit from President-elect Trump’s campaign pledges to boost U.S. energy production via deregulation and permitting reforms for energy infrastructure. We also believe it will be a beneficiary of the incoming administration’s support for the artificial intelligence (AI) industry. To power AI, data centers require reliable sources of energy. This should drive natural gas demand growth, and, in turn, energy infrastructure growth across the entire North American natural gas value chain.

In contrast, we believe the selloff in climate transition equities following the U.S. election was overdone, with sentiment toward the sector swinging too negative. Recent U.S. legislation introduced key policies to encourage clean power and decarbonization efforts. While some of these policies might be modified on the margin, we believe widespread overhauls that will impact the pace of decarbonization are unlikely. These programs enjoy bipartisan support, given that thousands of new jobs have been created in U.S. states spanning the political spectrum, at companies that are driving investments to combat physical and transition risk.

A bolstered deglobalization trend is likely to benefit sectors throughout the economy. A Trump administration is likely to accelerate the onshoring of production facilities in the U.S. Within real estate, this could create opportunities among multiple property types. We believe industrial landlords stand to benefit the most, but additional opportunities exist, as new facilities for everything from research and development to logistics are developed to meet new demand.

We believe active management is key, as the political landscape evolves. An active approach enables our investment teams to manage risk and seek opportunities to potentially preserve capital and produce alpha. For example, ahead of the U.S. election, we performed detailed risk analyses of our portfolios, examining their potential performance following the 2016 election and in various 2024 election result scenarios. This helped us to avoid or pare back our listed climate transition strategy’s exposure to names, such as those in the residential solar and offshore wind sectors, that we believed might be especially volatile post-election due to sentiment-driven risk. We also added exposure in our global infrastructure equities strategy to sectors, such as rails, that could benefit. At the same time, our active approach also allows us to potentially capture attractive buying opportunities that may emerge in the weeks, months and years following the election.

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