Transportation and infrastructure assets, in particular, are well-positioned to benefit from the reordering of supply chains and trade routes, JP Morgan Asset Management said in its seventh annual Global Alternatives Outlook.
The commotion surrounding the introduction and sudden suspension of certain tariffs imposed by Donald Trump sent markets into a turbulent trajectory this week, proving just how dangerous the newly minted President’s policy announcements and then reversals can be.
Acknowledging the growing trend of protectionism and shifting global trade dynamics, JP Morgan Asset Management predicted that not only will alternatives survive, but many will thrive in an environment of tariff-related disruptions and inflationary pressures.
“The prospect of higher future prices and supply chain disruptions could result in inventory stockpiling in the near term, benefiting industrial real estate and transportation,” the asset manager said.
“Companies focused on building resilient supply chains are likely to place greater emphasis on last-mile delivery, logistics and domestic warehousing in order to be positioned closer to end consumers, to store goods for longer periods and to ensure that products can reach consumers even in the face of global uncertainties.”
As supply chains adjust to the new trade realities, transport assets are also expected to benefit from more complex trade routes, higher shipping rates and increased demand for domestic rail and trucking services.
Beyond industrial real estate and transportation, real assets, too, are tipped to provide “critical infrastructure protection”, especially if trade tensions and tariffs prove to be inflationary.
“Although new-build infrastructure could suffer higher costs, operating regulated utilities have the contractual ability to raise end-user prices in response to input cost increases. Similarly, in real estate, operating costs are typically passed through to renters via rent increases,” JP Morgan said.
Additionally, it noted that the same economic growth that pushes up interest rates also increases property revenue, transport lease rates and asset values, which can help offset the negative effects of higher costs.
Looking ahead, JP Morgan forecast that 2025 will be marked by divergent monetary policy but also by higher terminal rates in many regions – an environment often conducive to private equity deals.
It noted that higher terminal rates, in particular, should favour private equity operators that focus on operational improvements and organic growth rather than relying on financial engineering.
“Growth equity strategies and venture capital rely less on debt financing, allowing these funds to be more active in a high-rate environment and capitalise on structural trends like healthcare innovation and cyber security,” it said.
Elsewhere, however, it cautioned that headwinds may arise from higher financing costs, exerting pressure on lower-quality borrowers in private credit and real estate.
“A risk for private credit is lower quality loans that could buckle under prolonged high interest rates,” JP Morgan said, adding, however, that defaults are expected to be muted.
“Should pockets of stress form, it could create opportunities for distressed credit strategies that can act as the lender of last resort for companies in need.”
Finally, while monetary policy may raise financing costs for private equity and lend itself to less creditworthy borrowers in private credit and commercial real estate, it could also generate volatility ripe for hedge funds to exploit.
“Hedge funds are well positioned to navigate fiscal and monetary policy shifts, and volatility fomented in this environment may benefit select hedge fund strategies,” it said.
“These changes are likely to create diverse impacts across companies and sectors, offering fertile ground for hedge funds employing long/short strategies to exploit market inefficiencies.”
