To The Moon

This week’s FOMC meeting is widely expected to result in a 25 basis point rate cut, marking the first such move in 2025 as the Federal Reserve responds to a softening US labor market and persistently moderate inflation. Market consensus places a greater than 90% probability on this outcome, with a small minority of analysts considering the chance of a larger half-point cut. FOMC Expectations and Rationale Most analysts and market participants expect the Federal Reserve to cut its benchmark interest rate by 0.25%, lowering the federal funds rate to the 4.00–4.25% range. The cut is in response to slowing job growth, rising unemployment (now around 4.3%), and inflation that has moderated but remains above the 2% target. The "dot plot" and economic projections to be released with the meeting will provide additional guidance on the pace of future cuts through the end of 2025. Impact on Singapore REITs A Fed rate cut directly lowers global borrowing costs and acts as a strong positive catalyst for Singapore REITs (S-REITs) by reducing their financing expenses and widening their yield spread over risk-free rates. Lower rates make REIT dividends more attractive relative to alternatives like government bonds, boosting fund flows and valuations in the sector. Year-to-date, S-REITs with predominantly Singapore portfolios have already seen double-digit total returns, and sector analysts maintain OVERWEIGHT stances, especially on resilient, high-yielding blue-chip names. As funding costs decline, S-REITs are expected to deliver stronger distributable income and improve their distribution per unit (DPU). Historical patterns show that periods following major Fed easing cycles have seen S-REITs and other global REITs outperform due to increased demand for yield assets and more favorable financing conditions. $CSOP iEdge SREIT ETF S$(SRT.SI)$ $CSOP iEdge SREIT ETF US$(SRU.SI)$ $LION-PHILLIP S-REIT(CLR.SI)$ $Amova-StraitsTrading Asia ex Japan REIT Index ETF(COI.SI)$ Key Takeaways The anticipated FOMC rate cut this week is set to usher in a more favorable environment for S-REITs, supporting valuations, income growth, and investor appetite for yield assets. Analysts recommend focusing on S-REITs with strong sponsors and solid fundamentals, particularly those in defensive sub-sectors such as suburban retail and commercial property. 👉Follow Kenny Loh