Then, the recession in China began to take shape, which continues to this day and, to vigorously seal the beginning of a very late plan on the part of the Fed, to resolve the serious wave of inflation that has been consolidated as a certainty since April of this year, has ended -with aggressiveness it must be added- for undoing all hope of suddenly seeing a new bull market.
In these circumstances, economic agents in institutions and in families around the world have sought alternatives to invest in an environment as rarefied as this one (fixed-rate bonds are a danger, due to the increase in rates, real estate is also dangerous). unless they can index inflation and in the stock market, be very wary of drastic adjustments in stock prices, hypersensitive now to earnings announcements, jobs, recession, inflation and rates) and have sheltered their wealth in assets like commoditiescash, some real estate and the private markets.
At this point, it is worth reviewing the universe of investment instruments at a global level and their relative weight, since it is from this that we will know what to do with the investment that is worth making in the equity markets. equity and private debt, which is perhaps a better alternative than the others.
All the instruments that exist to invest can be classified in a simplified way into four large categories, which are actually two double scissors: on the one hand we have public instruments, that is, those that have to be registered and traded on a Stock Exchange that is open to the public in general, that is, all those institutions or individuals that have direct access through membership or through an intermediary that has it. Then there are the private instruments, which are those that are designed, registered and traded in isolation from the public markets, that is, in a closed-circle disclosure scheme or at the invitation of the issuer.
The markets can also be divided, regardless of the classification already mentioned, into instruments of equity (also called stocks or variable income or property) and debt instruments (either fixed income or bonds). The former give the holder non-fungible ownership of an asset and the latter represent a fungible obligation for the issuer. At the intersection of these two scissors there is this great grid: public or private variable income and public or private fixed income.
Public equity markets include stocks (which globally were worth approximately $125 trillion current dollars -tdd- at its peak in 2022), publicly traded real estate (trusts called REITs that will be about 3 tdd globally ) and basic materials such as gold (with a global value of approximately 12 tdd during 2022), steel, corn, oil, etc.
On the other hand, public bonds will be worth about 130 tdd globally, the majority (around 45%) being government bonds. Companies issue bonds and weigh close to 20% of the total and the rest are mortgage, municipal, bank bonds and short-term money markets.
Formal private markets are much smaller and the market for equity it is worth around 10 tdd and the debt is around 1.6 tdd. Private REITs will be worth 1.5 tdd and the private market for infrastructure (power, water, cabling projects, etc.) will be worth close to 1 tdd. However, the real estate markets that are not formal are gigantic, since all private properties, including buildings, shopping centers, houses, warehouses, factories and others are worth approximately 360 tdd globally and from there, only the houses are 250 tdd, but because of their informal nature (they are not in a trust generating tradable income) and, because they are non-public, they are highly risky and illiquid.