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  • Alex Pettee, CFA

REITs Rebound | Stimulus Talks | Hope For Bankrupt Malls

Summary

  • U.S. equity markets rebounded Tuesday with the major averages eclipsing fresh all-time highs on continued positive developments in vaccine deployment and following reports of a resumption of long-stalled stimulus talks.

  • Closing at fresh record-highs and extending its historic November rally, the S&P 500 gained 1.1% today while the Dow Jones Industrial Average gained 185 points.

  • Real estate equities were among the leaders today as the Equity REIT ETF (VNQ) gained 1.3% with all 18 property sectors in positive territory and Mortgage REITs (REM) gained 0.9%.

  • Bankrupt mall landlord Pennsylvania REIT (PEI) finished lower by 2% after a pre-market jump on reports that it expects to emerge from Chapter 11 bankruptcy early in December. PEI has lost 80% of its value this year and 95% over the past five years.

  • Construction spending data this morning confirmed that U.S. housing industry continues to be one of the driving forces behind the early post-pandemic economic recovery. Residential construction spending was 14.5% higher in October than the prior year, which offset an 8.2% dip in nonresidential spending.

Real Estate Daily Recap

U.S. equity markets rebounded Tuesday with the major averages eclipsing fresh all-time highs on continued positive developments in vaccine deployment and following reports of a resumption of long-stalled stimulus talks. Closing at fresh record-highs and extending its historic November rally, the S&P 500 ETF (SPY) gained 1.1% today while the Dow Jones Industrial Average (DIA) gained 185 points following yesterday's 272-point dip. Real estate equities were among the leaders today as the Equity REIT ETF (VNQ) gained 1.3% with all 18 property sectors in positive territory. Mortgage REITs (REM), meanwhile, gained 0.9% following a decline yesterday.

December began on a positive note for Mid-Cap (MDY) and Small-Cap (SLY) stocks, as well, following a record-setting November in which the index-tracking ETFs surged by 14.3% and 18.6%, respectively. The gains today were broad-based following some end-of-month rebalancing activity yesterday. 10 of the 11 GICS equity sectors finished in positive territory today, led by the Communications (XLC), Financials (XLF), and Technology (XLK) sectors. The high-flying homebuilders were under pressure today, however, dragging on the Hoya Capital Housing Index and offsetting the relatively strong performance today from residential REITs and real estate technology names.

On the economic data front, U.S. PMI data this morning was roughly in-line with expectations, while manufacturing activity in China expanded for the ninth-straight month at a faster-than-expected rate. Meanwhile, construction spending data this morning confirmed that U.S. housing industry continues to be one of the driving forces behind the early post-pandemic economic recovery. Residential construction spending was 14.5% higher in October than the prior year, which offset an 8.2% dip in nonresidential spending. Robust spending on home construction drove total construction spending higher by 3.7% from last year, the strongest rate of annual growth since March.

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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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