- Alex Pettee, CFA
Good News Becomes Bad News For REITs
Done deal. US equity markets closed a wild week at fresh record highs after the U.S. and China clinched a long-awaited "Phase One" trade deal to avert tariffs on Sunday.
Along with a decisive election victory in the UK, the trade deal seems to resolve two critical geopolitical uncertainties. Investors, however, remain skeptical after endless false-starts in the trade dispute.
Good news has seemingly become bad news for the domestic, defensively-oriented REIT sector, which was on pace for a banner year before losing altitude over the past two months.
With potential clarity on key macroeconomic uncertainties, investors fear a return of the "rates up, REITs down" paradigm that dogged the REIT sector for 2016 through 2018.
For now, the "Goldilocks" macroeconomic environment under which REITs thrive remains intact. CPI and PPI data this week continued to reflect muted inflationary pressure.
