The S&P 500 has already gained back much of its Brexit-related selloff, down just 0.7% from its June 23 close, but that doesn’t mean investors are out of the woods yet. 

The market still has to deal with a myriad of problems from a slowing China to a seven-year bull market that has stretched valuations. Earnings for S&P 500 companies are expected to drop 5.2% when second quarter results start coming out next week, the fifth consecutive quarter of lower earnings and the worst run since 2009.

#-ad_banner-#Even as the UK negotiates its exit from the European Union over the next two years, it will have to deal with an immediate recession in the second half of this year according to most economists. The effect on the global economy should be muted, but the uncertainty around trade could weigh on already sluggish growth. 

There is one sector that stands to benefit from the Brexit vote and inevitable aftermath. Prices were hit hard after the vote, and it could be the next target for yield-hungry global investors. 

Don’t Fight The Global Fed
The S&P 500 is up just 2.6% since January 2015, months after the U.S. Federal Reserve ended its historic monetary easing program. Whether QE helped to spur the economy is still debated, but no one can argue the boost to asset prices that drove a 180% gain in U.S. stocks from the trough in 2009.

Global central bankers were late to the QE game but have since started their own programs, and the aftermath of the Brexit vote is expected to bring rate cuts and more stimulus. Bloomberg reports that the European Central Bank is considering loosening rules for bond purchases totaling $89 billion a month, and the Bank of England is expected to fight the coming recession with at least one rate cut.

Whether more global QE can spark economic growth is questionable. More likely is that prices of real assets, particularly real estate, will continue to benefit. 

Real estate also stands to gain on investors’ search for yield, as global bond rates fall to their lowest in recorded history. Prices for U.S. commercial property have already jumped as international investors rushed in to benefit from cash flow and a stronger dollar. International real estate may be the next hot asset class as investors look for value as well as yield.

A survey by CBRE Global Investors points to a 6% increase in 2016 real estate buying with nearly $1.2 trillion in deals expected. More than four-fifths (82%) of respondents said they plan to close as much or more in real estate deals this year.

The Vanguard Global ex-US Real Estate ETF (NYSE: VNQI) trades for just 1.1 times book value of fund holdings, less than half the price multiple of 2.5 times on the Vanguard REIT ETF (NYSE: VNQ) of U.S. commercial property. A strong dollar and weak international growth has weighed on the fund since 2012, but prices could head higher as global monetary policy gets even more accommodative. 

The fund holds 50.5% of assets in Asia/Pacific, followed by Europe (25.5%) and emerging markets (17.8%). It is diversified across all property types and pays a 2.98% dividend yield. Shares slumped 6% the Friday after the Brexit vote but could rebound 13% to last year’s high around $60 per share on renewed interest in global real estate and any weakness in the dollar.

The value of the greenback has plateaued over the last year, and may head lower if Fed hikes come slower than expected. The Fed noted after its last meeting that Brexit was a factor in waiting to raise rates, and it may hold off on raising rates for much of this year. Not only would a weaker dollar help to reflate international asset prices, but dividends received from VNQI would be worth more in dollar terms as well. 

While the U.S. real estate market has outperformed since 2011 on stronger economic growth and a booming dollar, international real estate stands to be the asset of choice on valuation and a healthy yield.

Risks To Consider: While negative rates and monetary stimulus will reflate real estate pricing, rents could drag cash flow if central banks cannot spark moderate growth.

Action To Take: Take a position in global real estate with ETFs like the Vanguard Global ex-US Real Estate ETF (NYSE: VNQI) for a rebound in global real estate as buyers return for yield and safety.

Editor’s Note: Low rates aren’t the only factor influencing the economy… Virtually every new President to take office has had a devastating effect on economic growth. It happened with Obama, it happened with Bush and Clinton… in fact, it’s happened to every president for 183 years. Will these 3 simple plays make you rich while the rest of the nation bleeds?