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  • Alex Pettee, CFA

REITs Lead • Retail Lags • Prison Dividend Cut

Summary

  • U.S. equity markets declined Friday, ending the week with modest declines, as economic data and corporate earnings reports indicated that the U.S. stumbled into the end of 2020.

  • Ending the week with declines of 1.5% the S&P 500 finished lower by 0.7% today while the Dow Jones Industrial Average declined by 177 points. Small-Caps and Mid-Caps were laggards today.

  • Real estate equities outperformed for the third-straight day to end the week with 2% gains as the Equity REIT ETF finished higher by 1.2% today with 13-of-19 property sectors higher.

  • Retail Sales data underscored the choppy and uneven economic recovery. Sales were shy of consensus estimates in December, declining by 0.7% from the prior month, the third-straight month of sequential declines.

  • Prison REIT GEO Group (GEO) gained 2.9% today despite announcing that it slashed its dividend for the second time as the private prison industry faces an uncertain future.

Real Estate Daily Recap

U.S. equity markets declined Friday, ending the week with modest declines, as economic data and corporate earnings reports indicated that the U.S. stumbled into the end of 2020 amid the second-wave of the pandemic. Ending the week with declines of 1.5% the S&P 500 ETF (SPY) finished lower by 0.7% today while the Dow Jones Industrial Average (DIA) declined by 177 points. Real estate equities outperformed for the third-straight day to end the week with 2% gains as the broad-based Equity REIT ETF (VNQ) finished higher by 1.2% today with 13 of 19 property sectors in positive territory while the Mortgage REIT ETF (REM) finished lower by 0.9%.

Four of the eleven GICS equity sectors finished in positive territory today led by the yield-sensitive sectors - Commerical Real Estate (XLRE) and Utilities (XLU) - as the 10-Year Treasury Yield retreated from mid-pandemic highs earlier in the week. The Energy (XLE) sector dipped nearly 4% but still finished the week as the top-performing sector. Mid-Cap (MDY) and Small-Cap (SLY) stocks also held onto weekly gains despite sliding more than 1% today. A strong week from homebuilders and home improvement retailers lifted the Hoya Capital Housing Index to strong weekly gains as well ahead of a jam-packed week of housing data in the week ahead.

Retail Sales data this morning underscored the choppy and uneven economic recovery. The Census Bureau reported that Retail Sales were shy of consensus estimates in December, declining by 0.7% from the prior month, the third-straight month of sequential declines. Sales remained impressive on a year-over-year basis, however, as retail sales excluding food were higher by a strong 6.3% from the prior year. E-commerce and housing-related categories remained the strongest segments. The Building Materials category rose another 0.9% in December is now higher by 17.0% from last year.

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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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