REITs Surge On Merger Mania

Summary

  • Real Estate stocks led U.S. equity markets to fresh record highs this week, shaking off coronavirus-related losses amid a frenetic slate of corporate earnings and M&A news.
  • Adding on to its impressive 3.2% gains in the prior week, the S&P 500 finished higher by another 1.6% while the Dow Jones Industrial Average added nearly 300 points.
  • REITs delivered their best week in more than a year, jumping 4.2% as earnings results continue to top estimates and the M&A animal spirits come alive.
  • Cell Tower REITs surged more than 10% after Sprint and T-Mobile reached a merger deal. Meanwhile, Simon Property plans to buy Taubman Centers, further consolidating Class-A mall ownership.
  • Residential REITs, homebuilders, and housing-related companies continue to lead the charge in 2020, delivering strong earnings this week as the U.S. housing market has come back to life.
  • This idea was discussed in more depth with members of my private investing community, iREIT on Alpha. Get started today »

Real Estate Weekly Outlook

The animal spirits are alive and well. A frenetic slate of corporate earnings and M&A news was exactly what the doctor ordered to restore harmony - and record highs - to the U.S. financial markets following a two-week panic over the coronavirus outbreak. While the global economic impact of the outbreak remains unclear - particularly in the fragile Asian and European economies - the U.S. consumer has yet to blink, reflected in resilient domestic economic data and solid corporate earnings. For now, the Goldilocks conditions of low interest rates and domestic-led economic growth have provided ideal conditions for residential and commercial real estate fundamentals, which was on full-display during peak real estate earnings season this week.

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(Hoya Capital, Co-Produced with Brad Thomas through iREIT on Alpha)

Adding on to its impressive 3.2% gains in the prior week, the S&P 500 ETF (SPY) finished higher by another 1.6% while the Dow Jones Industrial Average (DIA) added nearly 300 points, bringing its two-week gain above 1,100 points. The 10-Year Treasury Yield (IEF) added one basis point to close at 1.59%, still within shouting distance of its 2016-low. The story this week, however, was the 4.2% surge from the broad-based commercial Real Estate ETF (VNQ), which was its best week in more than a year and the fifth-best week over the past decade, led by cell tower REITs, which surged more than 10% after Sprint (S) and T-Mobile (TMUS) reached a merger deal.

real estate etf

The Hoya Capital Housing Index, the benchmark that tracks the performance of the U.S. residential real estate sector, was higher by 2.3% this week, also closing at all-time highs. Redfin (RDFN) jumped nearly 25% after the tech-focused broker reported an 88% jump in revenue, powered by increased housing market activity in late 2019. Residential mortgage REIT

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