Alex Pettee, CFA
REITs And Housing Sector Climb To Record Highs
After snapping a four-week losing streak in the prior week, US equity markets gained for the second straight week as solid employment data eased concerns of a more serious slowdown.
Perhaps the best evidence that the US economy is in better shape than the prevailing narrative suggests, the US housing index climbed to another new record high this week.
Party like it’s 2016. Surging 25% so far this year, the largest real estate ETF, VNQ, finally clawed its way to a new record high, surpassing its 2016 peak.
Nonfarm payrolls rose 130k in August, below consensus estimates of 160k. Job creation has slowed following a mid-cycle reacceleration in 2018, weighed down by particularly weak retail hiring.
Aside from a miss on the headline figure, however, employment data was actually quite solid. Two of the three major employment surveys - Household data and ADP - were significantly better than expected.
Following a nearly 3% in the prior week, the S&P 500 (SPY) climbed nearly 2% this past week while the Nasdaq (QQQ) ended higher by 2.2%. REIT investors continue to party like it's 2016 as the broad-based REIT ETF (VNQ) gained another 1.3% on the week, finally clawing its way to a new record high, surpassing its prior 2016 highs.
The economic calendar this coming week is highlighted by JOLTs, inflation, and retail sales data. On Tuesday, we get a look at July's Job Openings and Labor Turnover Survey. For most of the past two years, the number of job openings has outpaced the total number of unemployed Americans seeking work by at least one million. On Wednesday, we get a look at PPI data, while on Thursday, we'll see CPI data for August. Inflation has been quietly running warmer-than-expected over the past three months, boosted by the continued and persistent rise in housing costs (CPI: Shelter). Finally, we'll take a look at retail sales data, which has actually held-up rather well this summer despite this year's reacceleration in store closings and continued weakness in retail hiring.
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