Keepin' It Real 

Economics, Housing, & Commercial Real Estate Analysis

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  • Alex Pettee, CFA

Tensions Flare • REITs Rebound • Trifecta Implications

Summary

  • U.S. equity markets finished mostly higher Wednesday despite partisan tensions flaring in D.C. following the Georgia runoff elections in which Democrats gained the "trifecta" of political control.

  • The S&P 500 finished higher by 0.6% today while the Dow Jones Industrial Average gained 438 points. Small-Cap and Mid-Cap stocks surged while technology stocks lagged.

  • Despite the rise in bond yields and pressure on the heavily-weighted technology REIT sectors, real estate equities finished mostly higher today with the broad-based Equity REIT ETF (VNQ) gaining 0.2%.

  • Additional stimulus - and "reflation" - appears to be the first-order effects, reflected in the 9 basis point jump in the 10-Year Treasury Yield to post-pandemic highs. Economically-sensitive sectors led the gains today.

  • The relatively modest gain on the market-cap-weighted REIT indexes masked today's underlying strength across most of the REIT sector. More than 50 REITs gained more than 4% on the day led by many of the most beaten-down sectors from 2020.

Real Estate Daily Recap

U.S. equity markets finished mostly higher Wednesday despite partisan tensions flaring in D.C. following the Georgia runoff elections in which Democrats gained the "trifecta" of political control. The S&P 500 ETF (SPY) finished higher by 0.6% today while the Dow Jones Industrial Average (DIA) gained 438 points. Despite the rise in bond yields and pressure on the heavily-weighted technology REIT sectors, real estate equities finished mostly higher today with the broad-based Equity REIT ETF (VNQ) gaining 0.2% with 15 of 19 property sectors in positive territory. The Mortgage REIT ETF (REM) jumped 2.6% today after lagging earlier in the week.


Investors were seemingly unphased by the unfolding protests in Washington, instead focusing on the implications to monetary and fiscal policy of the "trifecta" of Democrat control. Additional stimulus - and "reflation" - appears to be the first-order effects, reflected in the 9 basis point jump in the 10-Year Treasury Yield to post-pandemic highs while Small-Caps (SLY) and Mid-Caps (MDY) surged. In all, nine of the eleven GICS equity sectors finished higher on the day, led by the economically-sensitive Financials (XLF), Materials (XLB), and Energy (XLE) sectors. Large-cap technology and social medial companies were under pressure today on concerns of the potential for increased regulation from the Democrat-controlled Senate committees.

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