Executive Summary
MENA markets surged ahead in September despite heightened geopolitical risks, thanks to the Fed’s audacious 50 bps cut in interest rates. Real Estate stocks in Saudi Arabia, UAE and Kuwait outperformed their respective broader markets, backed by a strong rebound in property prices and rental yields. The Fed reduced interest rates from 5.25% to 4.75%, marking the beginning of the monetary easing cycle. Global equity markets welcomed the move, extending their yearly gains further. Fed’s bold conviction to reduce interest rates comes from the assumption that the U.S. economy has achieved soft landing and inflation would gradually reduce to less than 2%. However, there is an alternate scenario that could play out involving a combination of inflation not reducing much, along with increase in unemployment number, which can cause Fed to retract. Hence, markets are walking on a tight rope and any small economic jolt can cause huge shocks to the market.
