• Alex Pettee, CFA

Short Squeeze Fizzles • REIT Earnings Update

Summary

  • U.S. equity markets rebounded Thursday on another volatile day as the "short squeeze phenomenon" appeared to climax while investors parsed a frenetic slate of economic data and earnings reports.

  • Following declines of 2.6% yesterday, the S&P 500 finished higher by 1.0% today and the Dow Jones Industrial Average rebounded by 300 points following yesterday's 634-point decline.

  • Led by the COVID-sensitive property sector, real estate equities were mostly higher today as the Equity REIT ETFs gained 0.5% today with 12 of 19 property sectors in positive territory.

  • The short squeeze saga reached a fever pitch after major brokerage firms including Robinhood and Interactive Brokers restricted the purchase of a basket of the heavily-shorted surging stocks including GameStop (GME) and AMC Entertainment (AMC), igniting a social media shockwave.

  • Homebuilders were under pressure today despite another solid slate of housing data and earnings reports. New Home Sales in December were higher by 15.2% from last December while median prices jumped 8%.

Real Estate Daily Recap

U.S. equity markets rebounded Thursday on another volatile day as the "short squeeze phenomenon" appeared to climax while investors parsed a busy slate of economic data and corporate earnings reports. Following declines of 2.6% yesterday, the S&P 500 ETF (SPY) finished higher by 1.0% today and the Dow Jones Industrial Average (DIA) rebounded by 300 points following yesterday's 634-point decline. Led by the COVID-sensitive property sector, real estate equities were mostly higher today as the Equity REIT ETFs (VNQ) gained 0.5% today with 12 of 19 property sectors in positive territory while the Mortgage REIT ETFs (REM) rebounded by 1.3%.

The short squeeze saga reached a fever pitch after major brokerage firms including Robinhood and Interactive Brokers restricted the purchase of a basket of the heavily-shorted surging stocks including GameStop (GME) and AMC Entertainment (AMC), igniting a social media shockwave and sparking a series of lawsuits and calls for government investigations. Despite the dip in these high-flyers, all eleven GICS equity sectors were higher on the day with the Financials (XLF), Materials (XLB), and Industrials (XLI) sectors leading to the upside. Small-Caps (SLY) traded lower today after delivering strong outperformance amid yesterday's sell-off.

Homebuilders were under pressure today despite another solid slate of housing data and earnings reports, offsetting a strong day from home improvement retailers and residential REITs in the Hoya Capital Housing Index. The U.S. Census Bureau reported this morning that New Home Sales in December were higher by 15.2% from last December - roughly in-line with estimates - which was the highest sales rate for the month of December since 2006. Consistent with home price data earlier this week, the median price of a new home sold in December jumped to $355,900, up more than 8% from a year ago.

As we've discussed throughout the week, many of the most heavily-shorted equity REITs have also been swept-up in the short squeeze phenomenon. After surging over the prior several days, Macerich (MAC), Tanger Outlets (SKT), and Iron Mountain (IRM) pulled-back sharply today while Seritage Growth (SRG) and Colony Capital (CLNY) continued their recent surge with another day of double-digit percentage gains. Per data from ShortSqueeze.com, the fifteen most heavily-shorted equity REITs listed below have delivered YTD gains averaging 38% compared to the 1% gain on the broader REIT index.

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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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