Weekly Review: REITs Climb In Risk-Off Rally As Yields Flirt With 18-Month Lows
REITs climbed more than 1% this week, extending their 2019 outperformance over the major indexes. Ongoing trade tensions and geopolitical uncertainty have strengthened investor demand for the domestic-focused REIT sector.
Lower benchmark yields continue to provide a strong economic backdrop for real estate outperformance. The 10-year yield and 30-year mortgage rate are each flirting with nearly 18-month lows.
Housing Starts and Homebuilder Sentiment data beat expectations this week as lower yields and strong recent growth in household formations point to a solid housing recovery in 2019.
Homebuilders jumped nearly 2%, but Homebuilding Products and Home Furnishings firms were hit by fears over rising input costs from tariffs even after news of progress on the USMCA.
Retail sales stumbled in April, but have held-up rather well overall in 2019 following a slowdown in late 2018. Strong results from Walmart and Macy’s kicked-off earnings season for retailers.
Following the worst week of 2019 for the major equity indexes, the S&P 500 (SPY) finished the week lower by another 0.7% as trade talks have reportedly broken down between the US and China. Progress on North American trade relations and a delay of the European auto tariffs were welcome news for investors, who have flocked to bonds and domestic-focused equity sectors in recent weeks, taking the 10-year yield down near 18-month lows. REITs (VNQand IYR) continue to be among the stronger-performing equity sectors of 2019, climbing more than 1% this week led by the more yield-sensitive segments of the real estate sector.