REVEALED: WHAT EVERY PROPERTY INVESTOR GETS WRONG
As interest rates, inflation and market sentiment fluctuate, investors are being urged to focus on data, not panic.
3 min
When markets become volatile, many property investors make the same mistake: they allow emotion to drive decisions that should be guided by strategy.
According to Melbourne buyers’ advocate and Mecca Property Group founder, Abdullah Nouh, periods of uncertainty often reveal the difference between investors who build long-term wealth and those who become distracted by short-term market noise.
In an environment where news travels faster than ever before, sentiment can shift rapidly. A single interest rate decision, inflation update or alarming headline can trigger uncertainty among buyers and investors, even when the underlying fundamentals remain largely unchanged.
Nouh argues that market panic is rarely driven by hard data alone.
Instead, uncertainty creates a psychological response that can lead buyers to delay decisions, investors to hesitate, and vendors to become unrealistic or desperate.
The danger, he says, is that these reactions are often expensive.
A buyer who pauses because the market feels uncertain may find themselves paying more for less months later after conditions improve. Waiting for perfect clarity can be a costly strategy because markets rarely provide it.
The distinction between reacting and making a considered decision becomes even more important during periods of volatility, when the pressure to respond quickly is at its greatest.
OPPORTUNITY OFTEN HIDES IN UNCERTAINTY
While many investors see volatility as a threat, Nouh believes it can also create opportunities.
In strong rising markets, momentum often carries deals forward, and confidence becomes self-reinforcing. In more challenging conditions, however, the quality of an asset becomes far more important.
Properties that are well located, appropriately priced and supported by strong fundamentals tend to hold their value. Assets buoyed largely by market sentiment often struggle when conditions soften.
Periods of uncertainty can also create opportunities for buyers willing to remain disciplined.
Motivated sellers may emerge, competition can ease, and negotiation becomes easier. These opportunities are not always obvious, but they can provide significant advantages for investors who remain focused on long-term objectives rather than short-term headlines.
LOOKING BEYOND THE HEADLINES
A key theme in Nouh’s analysis is the need to separate market sentiment from market reality.
While investor confidence may fluctuate, many of the structural forces supporting Australian property remain in place.
Rental markets remain tight across most major cities, vacancy rates are low, and population growth continues to place pressure on housing supply.
These factors have not disappeared because of a shift in market mood.
What has changed is affordability.
Higher interest rates have increased borrowing costs and put pressure on the cash flow of investors carrying debt. While this represents a genuine challenge, Nouh argues it should not be confused with evidence that the broader property market is fundamentally broken.
Understanding that distinction is critical for investors seeking to make rational decisions.
STICKING TO THE PLAN
Ultimately, Nouh believes investors should revisit the goals that informed their strategy before market sentiment changed.
If an investment strategy was sound before a negative headline appeared, it may remain sound afterwards.
For many investors, periods of volatility simply expose weaknesses that already existed in their approach.
The investors who build wealth across multiple property cycles are rarely those who perfectly time the market. Instead, they are the ones who maintain a clear strategy and continue executing it while others become distracted by short-term uncertainty.
Markets will continue to fluctuate, sentiment will rise and fall, and economic conditions will change.
But for investors focused on long-term wealth creation, the greatest risk may not be volatility itself. It may be allowing fear to override a well-considered plan.
As Nouh argues, the current uncertainty is not necessarily something to fear. In many cases, it is simply something to understand.
Mirzaian is a senior director within CBRE’s Development NSW business, operating across the company’s Western Sydney and North Sydney offices
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Wall Street’s hottest momentum trade has reversed sharply, as former winners tumble and heavily shorted stocks surge.
3 min
Wall Street’s hottest trade has gone ice cold.
For years, it paid off to buy stocks that were rising in price—and bet against struggling shares. The momentum trade was especially profitable this year, as investors piled into hot stocks including Micron Technology, Nvidia, Advanced Micro Devices and other artificial-intelligence darlings while wagering against those likely to be hurt by the embrace of AI.
The S&P 500 Momentum Index soared 44% in the second quarter, its best quarterly performance on record, and it surged 133% over the past five years, nearly double the broad market’s performance.
Mega funds and rookie investors alike piled into the trade, some using leverage and options contracts in an effort to amplify their returns, propelling the underlying shares higher.
“It is a self-fulfilling prophecy,” said Matthew Tym, managing director at Cantor Fitzgerald, of the trade.
Suddenly, the trade is a loser. The momentum index has tumbled more than 9% since July 1, lagging behind the S&P 500’s 2.8% gain. The index—which tracks stocks in the S&P 500 based on a “momentum score”—is on track for the biggest quarterly underperformance in 25 years. July was the second-worst month for the momentum trade in around 40 years, according to Bank of America estimates; the only month worse was April 2009, in the teeth of the global financial crisis.
Hedge funds that bought momentum shares while shorting low-momentum stocks suffered even more. At the same time, a basket of the most popular stocks held by hedge funds tracked by Goldman Sachs recorded its biggest one-month underperformance in July relative to the S&P 500 in more than 20 years, according to the bank’s analysts.
Momentum trading is based on a rather simple observation: Investments that go up tend to keep outperforming; those that underperform often remain laggards. This kind of trading might seem too simple a stock-picking strategy to work. Yet it often has.
“For decades, it didn’t take a lot of sophistication to run a momentum strategy and make a decent living at it,” says Agustin Lebron, senior researcher at EquiLibre, a trading firm.
Part of the reason: It takes a while for corporate and other information to spread to various investors, so they slowly build positions, producing buying momentum.
“A huge pension fund can’t flip around its positions in a day,” says Lebron. “Behavioral biases also account for some of the effect, as well—people tend to sell their winners too early and hold losers too long.”
Fans of the strategy point to the human tendency to extrapolate from past results—and chase investment returns—noting that momentum patterns have been evident in markets for decades, even centuries. They also say that some of the worst months for momentum strategies are during longer periods of outperformance.
Some have been doing the trade by buying the strongest investments in a sector while shorting the weakest; others lean in to rising markets or asset classes. Still others use a quantitative approach or turn to banks or others who sell ways to make distinct wagers on momentum as a “tradable factor” or a “thematic basket.”
The fans remain believers. “Any strategy has disappointing periods,” says Antti Ilmanen, global co-head of the portfolio solutions group at AQR Capital Management.
The surge in Moderna and other biotech stocks helped crush the momentum trade. These shares were among the most heavily shorted in recent years, but positive news on a cancer vaccine from Moderna and Merck sent those stocks flying, crushing some quant and other hedge funds. Moderna is up around 150% so far this month.
These traders had an especially rough day on Aug. 19, which Goldman Sachs told its clients was the worst day for “systematic long-short managers” in more than two years. About half of the losses were because of momentum trades, the bank said.
Some traders have begun to short, or bet against, the very stocks that propelled the momentum trade earlier this year. Net short positions in futures tied to the Nasdaq-100 index among speculators recently climbed to some of the highest levels of the past two decades, according to data from the Commodity Futures Trading Commission.
The about-face is a sign of how markets have become more treacherous for investors, even as indexes keep climbing. Part of the issue: the recent meltdown of Situational Awareness, a hedge fund that had piled into some of the most popular momentum shares, including chip stocks. After a period of market tumult, Nvidia shares rocketed almost 9% after its earnings, showing how quickly sentiment can shift.
Some investors say the run-up in share prices driving tech stocks higher reminds them at times of the dot-com frenzy decades ago.
Mike Ogborne, the founder of San Francisco-based Ogborne Capital Management, said he has grown more cautious on technology stocks and is keeping more of his portfolio in cash than he typically does.
And he is nervous about the surge in spending by technology giants and quarterly capital expenditures that keep rising.
“It is a little bit like Cinderella and the clock striking midnight. You don’t know when midnight is going to come around,” Ogborne said. “They don’t send a memo around telling you when the capex cycle is over.”
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