Keepin' It Real  

Economics, Housing, & Commercial Real Estate Analysis

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  • Alex Pettee, CFA

Dividend Bumps • Impeachment Vote • Cell Tower M&A

Summary

  • U.S. equity markets finished mostly higher Wednesday despite ongoing partisan tensions amid a second impeachment vote as investors parsed cooler-than-expected inflation data and the start of corporate earnings season.

  • Still modestly lower on the week, the S&P 500 finished higher by 0.23% today while the Dow Jones Industrial Average (DIA) declined by 8 points. The tech-heavy Nasdaq 100 bounced back with gains of 0.68%.

  • Real estate equities were mostly higher today as the broad-based Equity REIT ETF finished higher by 1.2% with 13 of 19 property sectors in positive territory.

  • Yield-sensitive sectors outperformed today after CPI data showed that core inflation rose just 0.1% in December as price pressures remain muted despite historic levels of fiscal stimulus.

  • American Tower (AM) announced that it will acquire Telxius Towers for $9.4B, the second major acquisition this year for the largest REIT by market-cap. This afternoon, mobile home REIT UMH Properties (UMH) increased its dividend for the first time in fifteen years.

Real Estate Daily Recap

U.S. equity markets finished mostly higher Wednesday despite ongoing partisan tensions amid a second impeachment vote as investors parsed cooler-than-expected inflation data and the start of corporate earnings season. Still modestly lower on the week, the S&P 500 ETF (SPY) finished higher by 0.3% today while the Dow Jones Industrial Average (DIA) declined by 8 points. The tech-heavy Nasdaq 100 (QQQ) rose 0.7%. Real estate equities were mostly higher today as the broad-based Equity REIT ETF (VNQ) finished higher by 1.2% with 13 of 19 property sectors in positive territory while the Mortgage REIT ETF (REM) pulled-back by 0.4%.

Six of the eleven GICS equity sectors finished higher on the day, led to the upside by the yield-sensitive Utilities (XLU) and Commercial Real Estate (XLK) sectors as the 10-Year Treasury Yield (IEF) pulled back following this morning's cooler-than-expected CPI report. Homebuilders and the broader Hoya Capital Housing Index also finished on the upside today following strong earnings results yesterday afternoon from KB Home (KBH), which jumped 2.5% after reporting that net orders surged 42% to 3,937 in Q4, the company’s highest fourth-quarter level since 2005 while commenting that it "expects to achieve significant growth in its scale and profits in 2021."

All eyes are on inflation data after Democrats won the "trifecta" of political control in Washington DC as investors expect that additional fiscal stimulus will be high on the political docket. Inflation expectations - and long-term interest rates - jumped to post-pandemic highs earlier this week, but pulled back today after the BLS reported this morning that the Core Consumer Price Index (CPI) rose just 0.1% in December from the prior month, pulling the annual increase down to 1.62%. The headline CPI index also recorded a 0.4% increase in December and is now higher by 1.32% over the past year.

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