AREIT FORECASTS

Lets start with a look at the dividend yield on its own. What is interesting from this chart is that Australian REITs look expensive on a historic basis.

However, it is important to give dividend yield context to the interest rate environment currently prevailing.
Here we look at the spread of the 10yr government bond as well as the 3m shorter term government bond.



The long term spread is also on the marginally expensive side of things, as well as the short end of the yield curve.



Interestingly the shape of the yield curve is exceptionally flat with long term yields only marginally higher than the short end. What is clear from this chart is there no inflation being priced in. 




When I look at the total return index we see a very sick looking chart, despite the recent capital raising shareholders who entered the AREIT sector in late 2006 are so far under water that it will take a lifetime to recover this investment. What I take away from this chart with its Bollinger Bands narrowing over a sideways moving market is that a breakout movement is probably fast approaching. Unfortunately which way the market will break is less clear.


Finally from a trending perspective we are at a very important level. We have the 50day exponential moving average about to intersect with the 200 day EMA, a break of the 50d above the 200d will be a bullish signal with a movement of the 50d below the 200d will be bearish. There is however an extremely rare occurrence with the actual index intersecting the "Death Cross" described below. This tells me that we are probably at an extremely important point, whereby the sideways movement of the last year or so is about to be replaced with a firm trend.