Keepin' It Real 

Economics, Housing, & Commercial Real Estate Analysis

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  • Alex Pettee, CFA

Euphoria Fades | Inflation Cools | Jobs Recovery Continues

  • U.S. equity markets finished lower Thursday despite encouraging economic data as the initial "vaccine rally" faded amid a continued acceleration in recorded coronavirus cases across the world.

  • Giving back about half of its gains this week, the S&P 500 finished lower by 1.0% today while the Dow Jones Industrial Average slid 317-points. The Nasdaq 100 declined 0.5%.

  • Hanging onto roughly 4% gains on the week, the broad-based Equity REIT ETF (VNQ) slipped 1.3% with 16 of 18 property sectors in negative territory while Mortgage REITs dipped 2.3%.

  • While there is a "light at the end of the tunnel" following the encouraging vaccine news from Pfizer's (PFE) earlier this week, it appears that the vaccine won't come soon enough to prevent a "third wave" of targeted economic shutdowns in several hotspots around the country.

  • Inflation data showed signs of stalling-out following several months of hotter-than-expected data. Core CPI was cooler than expected in October, rising less than 0.1% from last month.

Real Estate Daily Recap

U.S. equity markets finished lower Thursday despite encouraging economic data as the initial "vaccine rally" faded amid a continued acceleration in recorded coronavirus cases across the world. Giving back about half of its gains this week, the S&P 500 ETF (SPY) finished lower by 1.0% today while the Dow Jones Industrial Average (DIA) slid 317 points and the Nasdaq 100 (QQQ) declined by 0.5%. Hanging onto strong gains of roughly 4% on the week, the broad-based Equity REIT ETF (VNQ) slipped 1.3% today with 16 of 18 property sectors in negative territory while the Mortgage REIT ETF (REM) dipped 2.3% but remains higher by almost 6% this week.

While there is a "light at the end of the tunnel" following the encouraging vaccine news from Pfizer's (PFE) earlier this week, it appears that the vaccine won't come soon enough to prevent a "third wave" of targeted economic shutdowns in several hotspots around the country after the U.S. recorded record-high case counts and hospitalizations on Wednesday. All 11 GICS equity sectors finished lower on the day, dragged on the downside by the Energy (XLE), Materials (XLB), and Financials (XLF) sectors. Homebuilders and the broader Hoya Capital Housing Index pulled back today as well, while Small-Caps (SLY) and Mid-Caps (MDY) were also under pressure. 

After a surge earlier in the week on the positive vaccine news, the 10-Year Treasury Yield (IEF) dipped 7 basis points today as inflation data showed signs of stalling-out following several months of hotter-than-expected data. The BLS reported this morning that the Core Consumer Price Index (CPI) was cooler than expected in October, rising less than 0.1% from last month, pulling the annual increase down to 1.62%. The headline CPI index was also unchanged in October and is higher by just 1.20% from last year. As discussed last week, we believe that the projected U.S. election outcome of a "divided government" bodes wells for a continuation of the "lower-for-longer" economic regime that should be a sustained tailwind for the real estate sector.

The sell-off today also came despite encouraging employment data this morning from the Department of Labor. Initial Jobless Claims ticked lower to 709k from last week's downwardly revised 757k, the lowest week of initial claims since the pandemic began. Continuing Claims decreased to 6.79 million, down another 430k from last week. Since the peak in early May at 24.9 million, Continuing Claims have retreated by 18.1 million. The insured unemployment rate slid another 0.3 percentage points to just 4.4%, the lowest insured unemployment rate since February.

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