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  • Alex Pettee, CFA

China Contraction • REIT Earnings • Week Ahead

  • On the heels of their best month since November 2020, U.S. equity markets finished modestly lower Monday as investors weighed hawkish Fed commentary against data showing a continued economic cooldown.

  • Following gains of 4.3% last week - its first back-to-back weekly gains since March - the S&P 500 slipped 0.3% today but the more domestic-focused Small-Cap 600 advanced 0.2%.

  • Real estate equities were mostly lower today ahead of their busiest week of earnings season. Following a two-week stretch of notable outperformance, the Equity REIT Index declined 0.8% today.

  • PMI data over the weekend showed an unexpected contraction in Chinese factory activity. Stateside, S&P Global's PMI metric slipped to a two-year low in July while its measure for prices paid plunged 18.5 points to the lowest level in almost two years.

  • Employment data highlights another busy week of economic data and corporate earnings reports in the week ahead, headlined by JOLTS data on Tuesday, Jobless Claims on Thursday, and the BLS Nonfarm Payrolls report on Friday.

Real Estate Daily Recap

On the heels of their best month since November 2020, U.S. equity markets finished modestly lower Monday as investors weighed hawkish Fed commentary against data showing a continued cooldown in global growth ahead of a critical week of employment data. Following gains of 4.3% last week - its first back-to-back weekly gains since March - the S&P 500 slipped 0.3% today but the more domestic-focused Small-Cap 600 advanced 0.2% and the Mid-Cap 400 finished fractionally lower. Real estate equities were mostly lower today ahead of their busiest week of earnings season with reports from over 100 REITs. Following a two-week stretch of notable outperformance, the Equity REIT Index declined 0.8% today with 15-of-18 property sectors in negative territory but the Mortgage REIT Index gained 0.5%.

Comments from Fed officials pushing back on the idea of a necessary "pivot" in monetary policy were again shrugged-off by markets after another slate of economic data showing notable contractions in economic activity across several major economies. PMI data over the weekend showed an unexpected contraction in Chinese factory activity while South Korea's factory activity declined for the first time in almost two years. Stateside, S&P Global's PMI metric slipped to a two-year low in July while its measure for prices paid - a proxy for inflationary pressures - plunged 18.5 points to the lowest level in almost two years. The 10 Year Treasury Yield dipped to the lowest level since April, retreating by another 4 basis points to close at 2.61%. Seven of the eleven GICS equity sectors were lower on the day with the Energy (XLE) sector dragging on the downside as demand concerns dragged Crude Oil prices to nearly six-month lows.

Employment data highlights another busy week of economic data and corporate earnings reports in the week ahead, headlined by JOLTS data on Tuesday, Jobless Claims on Thursday, and the BLS Nonfarm Payrolls report on Friday. Economists are looking for job growth of roughly 250k in July which would be the lowest month-over-month increase since the start of the pandemic as the U.S. has now recovered 95% of the 22 million jobs lost from the COVID-related economic shutdowns. The unemployment rate, meanwhile, is expected to stay steady at 3.6%. Purchasing Managers' Index ("PMI") data will continue to be a major market focus - particularly in Europe and Asia - as recent reports have barely managed to hold on to the breakeven 50-level.

Real Estate Daily Recap

Best & Worst Performance Today Across the REIT Sector


Today we published our Real Estate Earnings Halftime Report. At the halfway point of earnings season, 30 REITs (70%) have raised their full-year FFO outlook while just 4 REITs (9%) have lowered or withdrawn their outlook. Strong results from REITs come amid an otherwise disappointing earnings season for the broader equity market as just 45% of S&P 500 companies boosted their outlook while 55% have lowered. REITs perform their best in a relatively "slow and steady" economic regime. A "soft landing" of moderating interest rates and slowing - but not sharply negative - economic growth would be an ideal macro environment. Upside standouts this earnings season have been Apartment, Shopping Center, and Industrial REITs. Currency headwinds have been a theme in the technology space, but core results have surprised on the upside. Office REITs have been the lone source of negative revisions.

The back-half of earnings season is generally more volatile as we'll see nearly the full slate of retail and hotel REIT reports and results from most of the remaining small-cap REITs. We'll hear results this afternoon from mall REIT Simon Property (SPG); shopping center REITs Brixmor (BRX) and InvenTrust (IVT); net lease REITs EPR Properties (EPR) and Gladstone Commercial (GOOD), apartment REIT Centerspace (CSR); cell tower REIT SBA Communications (SBAC); healthcare REIT Omega Healthcare (OHI), and office REITs Vornado (VNO), Douglas Emmett (DEI), and Equity Commonwealth (EQC). We'll continue to provide real-time coverage for Hoya Capital Income Builder members and will publish follow-up articles summarizing our thoughts and analysis throughout earnings season.

Mortgage REIT Daily Recap

Per the REIT Rankings Tracker available to Income Builder subscribers, mortgage REITs continued their recent outperformance with residential mREITs advancing 0.8% while commercial mREITs finished fractionally higher. Through the first week of earnings season, residential mREITs have reported an average decline in their BVPS of about 11% amid a historically brutal quarter for fixed income securities while commercial mREITs have reported an average BVPS decline of 0.3%. The earnings calendar heats up in the week ahead with results from two dozen mREITs including New Residential (NRZ) on Tuesday, New York Mortgage (NYMT) on Wednesday, and Starwood Capital (STWD) on Thursday.

REIT Preferreds & Capital Raising

Per the Income Builder Preferred Tracker available to Income Builder subscribers, REIT Preferred stocks finished higher by 1.05% today, on average. REIT Preferreds are lower by roughly 10% on a total return basis this year after ending 2021 with price returns of roughly 8.0% and total returns of roughly 14%. There are now roughly 180 REIT-issued exchange-listed preferred and debt securities with an average current yield of 6.89%.

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.

Hoya Capital Research & Index Innovations (“Hoya Capital”) is an affiliate of Hoya Capital Real Estate, a registered investment advisory firm based in Rowayton, Connecticut that provides investment advisory services to ETFs, individuals, and institutions. Hoya Capital Research & Index Innovations provides non-advisory services including market commentary, research, and index administration focused on publicly traded securities in the real estate industry.


This published commentary is for informational and educational purposes only. Nothing on this site nor any commentary published by Hoya Capital is intended to be investment, tax, or legal advice or an offer to buy or sell securities. This commentary is impersonal and should not be considered a recommendation that any particular security, portfolio of securities, or investment strategy is suitable for any specific individual, nor should it be viewed as a solicitation or offer for any advisory service offered by Hoya Capital Real Estate. Please consult with your investment, tax, or legal adviser regarding your individual circumstances before investing.


The views and opinions in all published commentary are as of the date of publication and are subject to change without notice. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. Any market data quoted represents past performance, which is no guarantee of future results. There is no guarantee that any historical trend illustrated herein will be repeated in the future, and there is no way to predict precisely when such a trend will begin. There is no guarantee that any outlook made in this commentary will be realized.


Readers should understand that investing involves risk and loss of principal is possible. Investments in real estate companies and/or housing industry companies involve unique risks, as do investments in ETFs. The information presented does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. An investor cannot invest directly in an index and index performance does not reflect the deduction of any fees, expenses or taxes.


Hoya Capital Real Estate and Hoya Capital Research & Index Innovations have no business relationship with any company discussed or mentioned and never receives compensation from any company discussed or mentioned. Hoya Capital Real Estate, its affiliates, and/or its clients and/or its employees may hold positions in securities or funds discussed on this website and our published commentary. A complete list of holdings and additional important disclosures is available at www.HoyaCapital.com.