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• On the Independence Day-shortened week, the major US equity indexes delivered another week of strong gains, climbing to new end-of-week record highs. REITs recovered after their worst week of 2019.
• With all eyes on the Fed, jobs data was generally better than forecast. BLS payrolls beat estimates but ADP employment data fell short, keeping the Fed on-course for a July rate cut.
• Dragged down by a slowdown in the goods-producing and retail sectors, the pace of job growth has slowed in 2019 to 170k per mouth from nearly 225k in 2018.
• Benefiting the yield-sensitive sectors, data over the past month substantiates the “Goldilocks” economic environment of low inflation, low interest rates, and slow-but-steady growth, ideal conditions for REITs and homebuilders.
• Construction spending came in weaker than expected in May, but lower interest rates and moderating construction costs provide a favorable backdrop for residential construction activity in the second half.

Coming off their worst week of 2019, the broad-based REIT ETFs (VNQ and IYR) rallied more than 2.5% led by the defensively-oriented manufactured housing and student housing sectors. After dipping as low as 1.94% intra-week following weak economic data early in the week, the 10-year yield (IEF) bounced off the lowest levels since 2016, jumping 10 basis points on Friday following the jobs report to close the week roughly unchanged at 2.05%, but the yield-sensitive REIT sector held its ground despite the bond sell-off. Benefiting the yield-sensitive sectors, data over the past month substantiates the “Goldilocks” economic environment of low inflation, low interest rates, and slow-but-steady growth, ideal conditions for REITs and homebuilders.

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Disclosure: An investor cannot invest directly in an index and index performance does not reflect the deduction of any fees, expenses or taxes. The information presented does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. We consider the information in this presentation to be accurate, but we do not represent that it is complete. It should not be relied upon as the sole source of suitability for investment. Please consult with your investment, tax or legal adviser regarding your individual circumstances before investing. Visit our website for a complete definition of all indexes cited in this report. Investing involves risk and loss of principal is possible.