• Alex Pettee, CFA

Merger Monday | Dividend Season | Preview Of Week Ahead

Summary

  • U.S. equity markets finished mostly lower Monday as investor optimism about forthcoming coronavirus vaccines was tempered by the ongoing "third wave" of coronavirus-induced economic shutdowns.

  • Following gains of 1.7% last week, the S&P 500 finished lower by 0.2% while the Dow Jones Industrial Average retreated 149-points. The tech-heavy Nasdaq 100, however, gained 0.6%.

  • Real estate equities were under pressure today following a strong week of outperformance as the broad-based Equity REIT ETF declined by 0.8% today with 14 of 18 property sectors in negative-territory.

  • Healthcare REIT Alexandria Real Estate (ARE) boosted its dividend for the second time this year, joining the six REITs that boosted dividends last week. 45 equity REITs have now raised dividends in 2020 compared to 66 that have reduced or suspended payouts.

  • Mortgage REIT Merger; Anworth Mortgage (ANH) jumped more than 8% after Ready Capital (RC) announced it would merge with the mREIT in a cash and stock deal worth $2.94 per share, a 25% premium to ANH's close last Friday.

Real Estate Daily Recap

U.S. equity markets finished mostly lower Monday as optimism about forthcoming coronavirus vaccines - which could be administered in the U.S. beginning as early as this week - was tempered by the ongoing "third wave" of coronavirus-induced economic shutdowns. Following gains of 1.7% last week, the S&P 500 ETF (SPY) finished lower by 0.2% while the Dow Jones Industrial Average (DIA) retreated 149-points. The tech-heavy Nasdaq 100 (QQQ), however, gained 0.6%. Real estate equities were under pressure today following a strong week of outperformance as the broad-based Equity REIT ETF (VNQ) declined by 0.8% today with 14 of the 18 property sectors in negative territory. The Mortgage REIT ETF (REM) declined 1.4% on the day.

As discussed in our Real Estate Weekly Outlook, encouraging vaccine news and stimulus hopes have powered the recent leg of the equity market rebound as the S&P 500 has now rebounded an astounding 65% from its lows in late-March. 8 of the 11 GICS sectors were lower on the day, however, with the Energy (XLE) and Real Estate (XLRE) sectors dragging on the downside. Homebuilders led the Hoya Capital Housing Index to gains on the day. Brokerage and data firm Redfin (RDFN) published a research report last Friday that showed continued strength across the U.S. housing industry. Of note, 42% of house listings accepted an offer within the first two weeks on the market, a supply shortage that powered a 16% surge in values from last year.

After a busy week of employment data, it will be a slower week of economic data in the week ahead headlined by the two major inflation reports. On Thursday, we'll see Consumer Price Index data for November, and on Friday, we'll see Producer Price Index data. Inflation metrics perked up during the summer after hitting multi-decade lows during the shutdown months, but the upward pressure appeared to have stalled in recent months as the pandemic-related supply-chain issues get resolved. We'll again be watching the weekly Mortgage Applications data on Wednesday and Jobless Claims data on Thursday along with JOLTs data on Wednesday.

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Disclosure: A complete list of holdings and Real Estate and Housing Index definitions and holdings are available at HoyaCapital.com. Hoya Capital Real Estate advises an Exchange Traded Fund listed on the NYSE. Hoya Capital is long all components in the Hoya Capital Housing 100 Index.

Additional Disclosure: It is not possible to invest directly in an index. Index performance cited in this commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. Data quoted represents past performance, which is no guarantee of future results. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy.

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