Upside-Down Week As REITs Stumble And Yields Surge

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• Signs of cooling trade tensions between the US and China sent US equity markets to their third straight weekly gain, edging closer to new all-time record highs.
• The 10-Year yield surged 35 basis points this week, the largest one-week jump since 2013. Yield-sensitive sectors including REITs, which have led this year’s rally, took a step back.
• Housing stocks set a series of new record highs throughout the week, jumping another 2%, led by the Home Furnishings, Mortgage Banking, and Real Estate Technology sectors.
• While lower oil and food prices continue to put downward pressure on the headline inflation data, core inflation has perked up over the last three months.
• Retail sales came in stronger-than-expected, but largely due to strength in the e-commerce sector. Brick & Mortar retailers continue to struggle with store closings and slowing sales growth.

The S&P 500 (SPY) and Dow Jones Industrial Average (DIA) each climbed another 1% this week, pushing the major large-cap benchmarks back to within 1% of all-time record highs. The small-cap Russell 2000 (IWM), which has underperformed for most of this year, surged nearly 5% on the week while on the flip-side of the coin, the high-flying REIT sector took a step back as the broad-based REIT ETFs (VNQ and IYR) dipped more than 2%.

With equity markets flirting new all-time highs, the Federal Reserve is expected to walk a tight-rope in this week’s upcoming meeting, where the committee is widely expected to cut interest rates by a quarter-point. Expectations of easing monetary policy have been a key factor in the stabilization in key economic sectors this year and have been the driving force behind the reacceleration in the single-family housing markets. Speaking of the housing markets, it’s a huge week for housing data with Homebuilder Sentiment released on Tuesday, Starts and Permits data released on Wednesday, and Existing Home Sales released on Thursday.

For an in-depth analysis of all real estate sectors, be sure to check out all of our quarterly reports: Apartments, Homebuilders, Student Housing, Single-Family Rentals, Manufactured Housing, Cell Towers, Healthcare, Industrial, Data Center, Malls, Net Lease, Shopping Centers, Hotels, Office, Storage, Timber, and Real Estate Crowdfunding.

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