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  • Alex Pettee, CFA

Black Friday Selloff • COVID Concerns • REITs On Sale

Summary

  • U.S. equity markets were sharply lower in the post-Thanksgiving shortened session as concerns over the emergence of another COVID variant rattled markets and sent economically-sensitive asset classes tumbling.

  • Posting its largest one-day decline since February, the S&P 500 finished off by 2.3% today while the Mid-Cap 400 dipped 3.1% and the Small-Cap 600 finished lower by 3.9%.

  • Real estate equities couldn't escape the selling pressure either as the Equity REIT Index dipped 2.8% today with all 19 property sectors in negative territory.

  • Concerns over the new COVID variant - which some scientists speculate could be more transmissible than past variants - have already prompted a fresh wave of economic and travel restrictions across Europe and Asia.

  • Nearly 70 REITs were lower by at least 4% on the day with the COVID-sensitive REIT sectors - retail, office, and hotels - under the most pressure with more than a dozen REITs lower by at least 7% on the session.

Income Builder Daily Recap

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U.S. equity markets were sharply lower in the post-Thanksgiving shortened session as concerns over the emergence of another COVID variant rattled markets and sent economically-sensitive asset classes tumbling. Posting its largest one-day decline since February, the S&P 500 finished off by 2.3% today while the Mid-Cap 400 dipped 3.2% and the Small-Cap 600 finished lower by 3.9%. Real estate equities couldn't escape the selling pressure either as the Equity REIT Index dipped 2.8% today with all 19 property sectors in negative territory while Mortgage REITs pulled back 2.2%.

Concerns over the new COVID variant - which some scientists speculate could be more transmissible than past variants - have already prompted a fresh wave of economic and travel restrictions across Europe and Asia which threaten to amplify global supply chain issues. The 10-Year Treasury Yield pulled back 14 basis points on the day, briefly dipping below 1.50% closing the trading session at 1.51%. All eleven GICS equity sectors were lower on the day with Energy (XLE) dragging on the downside as oil and gasoline futures dipped more than 10% on the day.

Equity REIT Daily Recap

Nearly 70 REITs were lower by at least 4% on the day with the COVID-sensitive REIT sectors - retail, office, and hotels - under the most pressure with more than a dozen REITs lower by at least 7% on the session. The "essential" property sectors - technology, residential, and industrial/logistics REITs - were outperformers on the day. In a note to Income Builder subscribers this morning, we added several retail REITs to our "Watch List" as potential targeted opportunities in the wake of today's selling pressure.

This week, we published State of the REIT Nation, which discussed how premium valuations have revived the "animal spirits" and sparked a much-needed wave of M&A and IPO activity which has facilitated accretive external growth. With six completed IPOs and four more on the way, 2021 will go down as the most active year for REIT IPOs since 2013. At the same time, several mega-sized non-traded REITs have scooped up public REITs. REITs have acquired nearly $50B in net assets over the past year - the largest expansion in the asset base since 2015. External growth may be just getting started as REIT balance sheets - and access to capital - have never been stronger.

Mortgage REIT Daily Recap

Per the REIT Rankings Tracker available to Income Builder subscribers, residential mREITs were lower by 1.5% today while commercial mREITs ended lower by 2.4%. Western Asset Mortgage (WMC) and NexPoint Real Estate (NREF) were the lone mREITs in positive territory for the day while commercial mREITs focused on the office sector were laggards. The average residential mortgage REIT now pays a dividend yield of 9.36% while the average commercial mortgage REIT pays a dividend yield of 6.40%.

REIT Preferreds & Capital Raising

Per the REIT Preferred Tracker available to Income Builder subscribers, REIT Preferreds proved to be a relative safe-haven today, declining by 0.47% - outperforming their respective common stocks by more than 2.5%.

Economic Data This Week

We'll publish a full analysis and commentary of this week's developments in the real estate industry, as well as an analysis of the busy week of economic data in our Real Estate Weekly Outlook report published this weekend.


We're excited to announce the launch of our new investment research service here on Seeking Alpha - Hoya Capital Income Builder. We've put together a great team of contributors from across the REIT, dividend, and ETF industry, so whether your focus is High Yield or Dividend Growth, we’ve got you covered with high-quality, actionable investment research and a comprehensive suite of tools and models to help build sustainable portfolio income targeting premium dividend yields of up to 10%. And of course, subscribers receive complete access to our investment research - including reports that are never published elsewhere - from Hoya Capital and our team of contributors.

Disclosure: Hoya Capital Real Estate advises two Exchange-Traded Funds listed on the NYSE. In addition to any long positions listed below, Hoya Capital is long all components in the Hoya Capital Housing 100 Index and in the Hoya Capital High Dividend Yield Index. Index definitions and a complete list of holdings are available on our website.

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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Hoya Capital Research & Index Innovations is an affiliated index provider and research firm that builds custom indexes tracking U.S. commercial and residential real estate sectors, including indexes tracked by exchange-traded funds (ETFs). 

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