• Alex Pettee, CFA

Big Tech Correction • More Stimulus • Inflation Week

Summary

  • U.S. equity markets were mixed Monday amid an intensification of the "reopening trade" as large-cap technology stocks continued to slide as investors rotated into more value-oriented segments of the market.

  • Following gains of 0.9% last week, the S&P 500 finished lower by 0.5% while the tech-heavy Nasdaq 100 dipped 2.7% to fall into "correction territory." However, the Dow rallied 306-points.

  • Real estate equities were mostly higher today, as the broad-based Equity REIT ETFs finished higher by 1.0% with 13-of-19 property sectors in positive territory while Mortgage REIT gained 2.3%.

  • AvalonBay Communities (AVB) finished higher by nearly 4% after the urban-focused multifamily REIT reported last Friday afternoon that its seeing sequential improvement in leasing trends.

  • All eyes are on interest rates and inflation this week as lawmakers are poised to approve a $1.9 trillion fiscal stimulus package. We'll see the Consumer Price Index report released on Wednesday and the Producer Price Index report on Friday.

Real Estate Daily Recap

U.S. equity markets were mixed Monday amid an intensification of the "reopening trade" as large-cap technology stocks continued to slide as investors rotated into more value-oriented segments of the market. Following gains of 0.9% last week, the S&P 500 ETF (SPY) finished lower by 0.5% while the tech-heavy Nasdaq 100 (QQQ) dipped another 2.7% to again fall into "correction territory." Real estate equities were mostly higher today - led by the COVID-sensitive property sectors - as the broad-based Equity REIT ETFs (VNQ) finished higher by 1.0% with 13-of-19 property sectors in positive territory while the Mortgage REIT ETFs (REM) gained 2.3%.

As discussed in our Real Estate Weekly Outlook, all eyes are on interest rates and inflation this week as lawmakers are poised to approve a $1.9 trillion fiscal stimulus package that comes as economic growth is already poised to accelerate amid a vaccine-driven reopening. The 10-Year Treasury Yield (IEF) climbed 4 basis points to close at 1.60%, the highest closing level in over a year. The heavily-weighted Technology (XLK) and Communications (XLC) sector dragged the large-cap indexes lower today even as 8 of 11 GICS equity sectors finished higher. Homebuilders and the broader Hoya Capital Housing Index also delivered strong gains on expectations that expanded fiscal stimulus measures will continue to drive housing-related spending.

Inflation data highlights the economic calendar in the week ahead with the Consumer Price Index report released on Wednesday and the Producer Price Index report on Friday. Inflation expectations - along with longer-term Treasury Yields - have rebounded sharply since Election Day on the prospects for additional fiscal stimulus and on improving coronavirus data, but recent inflation reports have yet to show a broad-based uptick in either consumer or producer price levels. We'll also be watching the weekly MBA Mortgage Application data on Wednesday and Jobless Claims data on Thursday.

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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.

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