Act Big • Earning Season Begins • Week Ahead

Summary

• U.S. equity markets finished broadly higher Tuesday as corporate earnings season kicked into high-gear while the reigns of political power are officially handed-off to the incoming Biden administration.

• Following a decline of 1.5% last week, the S&P 500 finished higher by 0.8% today while the Dow Jones Industrial Average gained 116-points and the tech-heavy Nasdaq 100 jumped 1.5%.

• After leading to the upside last week, real estate equities were mostly lower today as the Equity REIT ETF finished lower by 0.3% today with 12-of-19 property sectors in negative-territory.

• Equity markets entered the week on a high note following comments from incoming Treasury Secretary Janet Yellen as the former Fed Chair argued that lawmakers should "act big" on additional fiscal stimulus.

• The busy week of housing data kicks off tomorrow with Homebuilder Sentiment and continues on Thursday and Friday with Housing Starts, Building Permits, and Existing Home Sales.

Real Estate Daily Recap

U.S. equity markets finished broadly higher Tuesday as corporate earnings season kicked into high-gear while the reigns of political power are officially handed-off to the incoming Biden administration. Following a decline of 1.5% last week, the S&P 500 ETF (SPY) finished higher by 0.8% today while the Dow Jones Industrial Average (DIA) gained 116 points and the tech-heavy Nasdaq 100 (QQQ) jumped 1.5%. After leading to the upside last week, real estate equities were mostly lower today as the broad-based Equity REIT ETF (VNQ) finished lower by 0.3% today with 12 of 19 property sectors in negative territory while the Mortgage REIT ETF (REM) finished higher by 0.3%.

Equity markets began the week on a high note following comments from incoming Treasury Secretary Janet Yellen. The former Fed Chair argued that lawmakers should "act big" on additional fiscal stimulus. Eight of the eleven GICS equity sectors finished higher on the day, led to the upside by the suddenly high-flying Energy (XLE) sector while the Communications (XLC), and Technology (XLK) sectors bounced back after a rough week amid an ongoing debate over mega-cap monopoly power and free speech. Homebuilders and the broader Hoya Capital Housing Index delivered strong gains as well ahead of a busy week of housing data.

As discussed in our Real Estate Weekly Outlook, we have another jam-packed slate of economic and housing data in the week ahead. On Wednesday, the NAHB will release Homebuilder Sentiment data for January. On Thursday, we'll see Housing Starts and Building Permits for December. Then on Friday, we'll see Existing Home Sales for December. We'll see a flurry of PMI and manufacturing data throughout the week, and on Wednesday and Thursday, we'll be watching the weekly Mortgage Applications and Jobless Claims data as well.

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Disclosure: A complete list of holdings and Real Estate and Housing Index definitions and holdings are available at HoyaCapital.com. Hoya Capital Real Estate advises an Exchange Traded Fund listed on the NYSE. Hoya Capital is long all components in the Hoya Capital Housing 100 Index.

Additional Disclosure: It is not possible to invest directly in an index. Index performance cited in this commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. Data quoted represents past performance, which is no guarantee of future results. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy.

Dividend Boosts Lift REITs

• U.S. equity markets finished mostly lower this past week as partisan tensions raged on while economic data and corporate earnings reports indicated that the U.S. economy stumbled into the start of 2021.

• The S&P 500 retreated 1.5% while the tech-heavy Nasdaq dipped more than 2% amid pressure on social media stocks following the de-platforming of President Trump and conservative-leaning media outlets.

• A fresh wave of dividend increases powered real estate equities to a strong week. Equity REITs finished higher by nearly 2% with 13 of 19 property sectors in positive territory.

• Inflation expectations jumped to mid-pandemic highs with the 10-Year Breakeven rate closing at 2.10% despite cooler-than-expected inflation data this past week and downbeat employment and retail sales data.

• Is 2021 the year for real estate? Five equity REITs and one mortgage REIT boosted their dividend this past week. Homebuilder KB Home surged after reporting a stellar fourth quarter as the housing industry continues to lead the recovery.

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Disclosure: A complete list of holdings and Real Estate and Housing Index definitions and holdings are available at HoyaCapital.com. Hoya Capital Real Estate advises an Exchange Traded Fund listed on the NYSE. Hoya Capital is long all components in the Hoya Capital Housing 100 Index.

Additional Disclosure: It is not possible to invest directly in an index. Index performance cited in this commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. Data quoted represents past performance, which is no guarantee of future results. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy.

Healthcare REITs: Vaccine Brings New Life

• Healthcare REITs - particularly senior housing and long-term care facilities - have been "ground zero" of the ongoing coronavirus pandemic as the illness has devastated the world's elderly populations.

• While the initial roll-out has been slow, the successful approval of coronavirus vaccines may have prevented a "lost decade" for senior housing REITs, which reported record-low occupancy rates in late-2020.

• Government relief funds continue to pour into the healthcare sector, which has not only prevented catastrophe, but mid-pandemic fundamentals are also actually stronger for several healthcare REIT sub-sectors.

• Selectivity is especially essential in the bifurcating healthcare REIT sector, but long-term fundamentals remain more compelling than other beaten-down REITs in the retail and office sectors.

• Silver linings? Senior Housing remains the troubled spot, but external growth opportunities should be plentiful over the next half-decade for the most well-capitalized REITs amid the disruptions.

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Disclosure: A complete list of holdings and Real Estate and Housing Index definitions and holdings are available at HoyaCapital.com. Hoya Capital Real Estate advises an Exchange Traded Fund listed on the NYSE. Hoya Capital is long all components in the Hoya Capital Housing 100 Index.

Additional Disclosure: It is not possible to invest directly in an index. Index performance cited in this commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. Data quoted represents past performance, which is no guarantee of future results. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy.