Keepin' It Real 

Economics, Housing, & Commercial Real Estate Analysis

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  • Alex Pettee, CFA

Daily Recap: Oil Surges | REITs Gain | Big Week of Housing Data

This weekend's drone attacks on Saudi Arabia's oil industry sent crude oil futures, and oil-tracking ETFs (USO) surging by more than 10% on the day, logging one of the largest one-day moves in the commodity of all time. Highlighting the profoundly different economic dynamics today than in decades-past where the United States was highly dependent on foreign oil, US stock markets were relatively unscathed by the new and unwelcome risk to global economic growth. The S&P 500 ETF (SPY) finished lower by 0.3% while the Nasdaq ETF (QQQ) finished off by 0.5%. Continuing a broader theme of sector and factor-rotation that has occurred over the past month, the small-cap Russell 2000 (IWM) climbed 0.4%.

Coming off a 2% decline last week, real estate was one of the best-performing equity sectors on the day with the broad-based REIT ETF (VNQ) gaining 1.0%. Surprisingly, the 10-year Treasury yield, which has historically exhibited a high correlation with oil prices, actually retreated by six basis points on the day, suggesting that either investors are betting that the near-term oil price surge is transitory, or that a "bid for safety" overwhelmed the upward pressure on inflation expectations typically associated with rising oil prices.

Coming off a record weekly closing high for the housing industry benchmark, the Hoya Capital Housing Index finished roughly flat on the day, led to the upside by the Real Estate Technology & Brokerage and Residential REIT sectors. Ahead of a critical week of single family housing data, the single-family homebuilder ETFs (XHB and ITB) finished slightly lower. Toll Brothers (TOL), Redfin (RDFN), Realogy (RLGY), and Re/Max (RMAX) were upside standouts on the day while PPG (PPG), AO Smith (AOS), and Sherwin Williams (SHW) were among the laggards in the housing benchmark.

Gains in the commercial REIT sector were led by the data center, net lease, and healthcare REIT sectors while the shopping center and student housing REIT sectors were the laggards. Data Center REITs Equinix (EQIX) and Digital Realty (DLR), as well as healthcare REITs Sabra (SBRA), Medical Properties (MPW), and Healthcare Trust of America (HTA) were among the upside standouts in the REIT sector.

With gains of nearly 24% so far this year, the broad-based REIT ETFs (VNQ and IYR) continue to outperform the S&P 500, which has climbed roughly 20%. The US Housing sector has climbed 27% this year led by the 46% surge in Homebuilders and strong gains from the Home Furnishings and Homebuilding Products & Materials sectors. At 1.84%, the 10-year yield has retreated by 85 basis points since the start of the year and is roughly 140 basis points below peak levels of 2018 around 3.25%.

With equity markets flirting new all-time highs, the Federal Reserve is expected to walk a tight-rope in this week’s upcoming meeting, where the committee is widely expected to cut interest rates by a quarter-point. Expectations of easing monetary policy have been a key factor in the stabilization in key economic sectors this year and have been the driving force behind the reacceleration in the single-family housing markets. Speaking of the housing markets, it’s a huge week for housing data with Homebuilder Sentiment released on Tuesday, Starts and Permits data released on Wednesday, and Existing Home Sales released on Thursday.

For an in-depth analysis of all real estate sectors, be sure to check out all of our quarterly reports: Apartments, Homebuilders, Student Housing, Single-Family Rentals, Manufactured Housing, Cell Towers, Healthcare, Industrial, Data Center, Malls, Net Lease, Shopping Centers, Hotels, Office, Storage, Timber, and Real Estate Crowdfunding.

Disclosure: An investor cannot invest directly in an index and index performance does not reflect the deduction of any fees, expenses or taxes. The information presented does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. We consider the information in this presentation to be accurate, but we do not represent that it is complete. It should not be relied upon as the sole source of suitability for investment. Please consult with your investment, tax or legal adviser regarding your individual circumstances before investing. Visit our website for a complete definition of all indexes cited in this report. Investing involves risk and loss of principal is possible.

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Hoya Capital Real Estate, LLC

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Hoya Capital Real Estate ("Hoya Capital") is an SEC-registered investment advisory firm that provides investment management services to ETFs, individuals, and institutions, focusing on portfolio and index management of publicly traded securities in the real estate industry. It is not possible to invest directly in an index. Index performance cited in this website or commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. Nothing on this site nor any published commentary by Hoya Capital is intended to be investment, tax, or legal advice or an offer to buy or sell securities. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and should not be considered a complete discussion of all factors and risks. Data quoted represents past performance, which is no guarantee of future results. Investing involves risk. Loss of principal is possible. Investments in companies involved in the real estate and housing industries involve unique risks, as do investments in ETFs, mutual funds, and other securities. Hoya Capital has no business relationship with any company discussed/mentioned. Hoya Capital never receives compensation from any company discussed/mentioned. Hoya Capital, its affiliate, 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 other important disclosures and definitions are available by clicking the links below.

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