REITs Catch a Bid Amid Market Turmoil
On a wild week, the S&P 500 dipped more than 4%, erasing its 2018 gains amid trade tensions and concern that the US economy may be losing steam into year-end. For the first time all year, REITs are outperforming the S&P 500 as the 10-year yield dipped to levels last seen in early September. Mortgage rates are poised to follow.
Job growth fell short of expectations in November, but most labor market metrics continue to show solid strength. We continue to believe that there is significant labor market slack outstanding. As the yield curve flirts with inversion, the market may be forcing the Fed’s hand. A dovish Fed would be likely good news for yield-sensitive REITs and Homebuilders. Construction spending fell short of expectations in October, dragged down by the weakest growth in residential spending since 2011. A resurgent public sector has made up some of the slack.