REITs Lead • Retail Lags • Prison Dividend Cut

Summary

• U.S. equity markets declined Friday, ending the week with modest declines, as economic data and corporate earnings reports indicated that the U.S. stumbled into the end of 2020.

• Ending the week with declines of 1.5% the S&P 500 finished lower by 0.7% today while the Dow Jones Industrial Average declined by 177 points. Small-Caps and Mid-Caps were laggards today.

• Real estate equities outperformed for the third-straight day to end the week with 2% gains as the Equity REIT ETF finished higher by 1.2% today with 13-of-19 property sectors higher.

• Retail Sales data underscored the choppy and uneven economic recovery. Sales were shy of consensus estimates in December, declining by 0.7% from the prior month, the third-straight month of sequential declines.

• Prison REIT GEO Group (GEO) gained 2.9% today despite announcing that it slashed its dividend for the second time as the private prison industry faces an uncertain future.

Real Estate Daily Recap

U.S. equity markets declined Friday, ending the week with modest declines, as economic data and corporate earnings reports indicated that the U.S. stumbled into the end of 2020 amid the second-wave of the pandemic. Ending the week with declines of 1.5% the S&P 500 ETF (SPY) finished lower by 0.7% today while the Dow Jones Industrial Average (DIA) declined by 177 points. Real estate equities outperformed for the third-straight day to end the week with 2% gains as the broad-based Equity REIT ETF (VNQ) finished higher by 1.2% today with 13 of 19 property sectors in positive territory while the Mortgage REIT ETF (REM) finished lower by 0.9%.

Four of the eleven GICS equity sectors finished in positive territory today led by the yield-sensitive sectors - Commerical Real Estate (XLRE) and Utilities (XLU) - as the 10-Year Treasury Yield retreated from mid-pandemic highs earlier in the week. The Energy (XLE) sector dipped nearly 4% but still finished the week as the top-performing sector. Mid-Cap (MDY) and Small-Cap (SLY) stocks also held onto weekly gains despite sliding more than 1% today. A strong week from homebuilders and home improvement retailers lifted the Hoya Capital Housing Index to strong weekly gains as well ahead of a jam-packed week of housing data in the week ahead.

Retail Sales data this morning underscored the choppy and uneven economic recovery. The Census Bureau reported that Retail Sales were shy of consensus estimates in December, declining by 0.7% from the prior month, the third-straight month of sequential declines. Sales remained impressive on a year-over-year basis, however, as retail sales excluding food were higher by a strong 6.3% from the prior year. E-commerce and housing-related categories remained the strongest segments. The Building Materials category rose another 0.9% in December is now higher by 17.0% from last year.

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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.

More Stimulus • Dividend Boosts • Jobless Claims Jump

Summary

• U.S. equity markets finished mostly lower Thursday as investors awaited details on the stimulus plan from President-Elect Biden as employment data this morning showed continued choppiness in the economic recovery.

• Now lower by 0.7% on the week, the S&P 500 finished off by 0.4% today while the Dow declined by 69 points. Mid-Caps gained 1.0% while Small-Caps jumped 2.2%.

• Real estate equities outperformed for the second-straight day - led by the most beaten-down sectors of 2020. The Equity REIT ETF finished higher by 0.6% with 10-of-19 sectors in positive-territory.

• Tanger Outlets (SKT) jumped 9.6% after announcing that it will resume its suspended dividend at a rate of $0.1775/share dividend, which is roughly half of its prior pre-pandemic rate of $0.36 per share. Tanger remains one of the worst-performing REITs of the past five years.

• Initial Jobless Claims jumped to the highest level since August at 965k after showing signs of improvement in the prior three weeks. Driving this increase, the recently-enacted stimulus program provides an additional $300 per week in enhanced unemployment payments on top of state benefits.

Real Estate Daily Recap

U.S. equity markets finished mostly lower Thursday as investors awaited details on a fresh stimulus plan from President-Elect Biden as employment data this morning showed continued choppiness in the economic recovery. Now lower by 0.7% on the week, the S&P 500 ETF (SPY) finished off by 0.4% today while the Dow Jones Industrial Average (DIA) declined by 69 points. Real estate equities outperformed for the second-straight day - led by the most beaten-down sectors of 2020 - as the broad-based Equity REIT ETF (VNQ) finished higher by 0.6% with 10 of 19 property sectors in positive territory while the Mortgage REIT ETF (REM) finished higher by 0.9%.

While the large-cap indexes were under pressure, expectations of up to $2 trillion in additional stimulus lifted the Small-Cap (SLY) and Mid-Cap (MDY) to strong gains while Bitcoin (BTC-USD) also jumped another 5% today after an early-week sell-off. A strong day from housing-related retailers and financials lifted the Hoya Capital Housing Index to fresh record-highs. Seven of the eleven GICS equity sectors finished lower on the day, however, as the large-cap Technology (XLE) and Communications (XLC) sectors remain under pressure amid an ongoing social media censorship controversy while the Energy (XLE) sector continued its strong gains in 2021 after a brutal 2020.

Today's mixed performance followed disappointing employment data this morning as Initial Jobless Claims jumped to the highest level since August at 965k after showing signs of improvement in the prior three weeks. Continuing Claims ticked up to 5.27 from 5.07, but since the peak in early May at nearly 25 million, Continuing Claims have retreated by 19.5 million. Perhaps driving these increases, the recently enacted stimulus package provides an additional $300 per week in enhanced unemployment benefits on top of state benefits.

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The REIT Forum is now the exclusive home to Hoya Capital premium research. Visit our website and join our email list for quick access to our real estate research library: HoyaCapital.com where we have links all of our real estate sector reports and daily recaps. You can also follow our real-time commentary on Twitter, LinkedIn, and Facebook.

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 Bumps • Impeachment Vote • Cell Tower M&A

Summary

• U.S. equity markets finished mostly higher Wednesday despite ongoing partisan tensions amid a second impeachment vote as investors parsed cooler-than-expected inflation data and the start of corporate earnings season.

• Still modestly lower on the week, the S&P 500 finished higher by 0.23% today while the Dow Jones Industrial Average (DIA) declined by 8 points. The tech-heavy Nasdaq 100 bounced back with gains of 0.68%.

• Real estate equities were mostly higher today as the broad-based Equity REIT ETF finished higher by 1.2% with 13 of 19 property sectors in positive territory.

• Yield-sensitive sectors outperformed today after CPI data showed that core inflation rose just 0.1% in December as price pressures remain muted despite historic levels of fiscal stimulus.

• American Tower (AM) announced that it will acquire Telxius Towers for $9.4B, the second major acquisition this year for the largest REIT by market-cap. This afternoon, mobile home REIT UMH Properties (UMH) increased its dividend for the first time in fifteen years.

Real Estate Daily Recap

U.S. equity markets finished mostly higher Wednesday despite ongoing partisan tensions amid a second impeachment vote as investors parsed cooler-than-expected inflation data and the start of corporate earnings season. Still modestly lower on the week, the S&P 500 ETF (SPY) finished higher by 0.3% today while the Dow Jones Industrial Average (DIA) declined by 8 points. The tech-heavy Nasdaq 100 (QQQ) rose 0.7%. Real estate equities were mostly higher today as the broad-based Equity REIT ETF (VNQ) finished higher by 1.2% with 13 of 19 property sectors in positive territory while the Mortgage REIT ETF (REM) pulled-back by 0.4%.

Six of the eleven GICS equity sectors finished higher on the day, led to the upside by the yield-sensitive Utilities (XLU) and Commercial Real Estate (XLK) sectors as the 10-Year Treasury Yield (IEF) pulled back following this morning's cooler-than-expected CPI report. Homebuilders and the broader Hoya Capital Housing Index also finished on the upside today following strong earnings results yesterday afternoon from KB Home (KBH), which jumped 2.5% after reporting that net orders surged 42% to 3,937 in Q4, the company’s highest fourth-quarter level since 2005 while commenting that it "expects to achieve significant growth in its scale and profits in 2021."

All eyes are on inflation data after Democrats won the "trifecta" of political control in Washington DC as investors expect that additional fiscal stimulus will be high on the political docket. Inflation expectations - and long-term interest rates - jumped to post-pandemic highs earlier this week, but pulled back today after the BLS reported this morning that the Core Consumer Price Index (CPI) rose just 0.1% in December from the prior month, pulling the annual increase down to 1.62%. The headline CPI index also recorded a 0.4% increase in December and is now higher by 1.32% over the past year.

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The REIT Forum is now the exclusive home to Hoya Capital premium research. Visit our website and join our email list for quick access to our real estate research library: HoyaCapital.com where we have links all of our real estate sector reports and daily recaps. You can also follow our real-time commentary on Twitter, LinkedIn, and Facebook.

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.