Certainly Uncertain | Seeking Alpha

Posting its worst week in three months, the S&P 500 slipped 2.0% on the week, ending the week on a three-day skid after hitting fresh record highs on Tuesday. “Rotation” was the major dynamic for a second straight week, as tech-specific concerns compounded pre-existing macroeconomic dynamics that have fueled a shift in sentiment and fund flows from growth to value. The mega-cap Nasdaq 100 – which had outperformed the Small-Cap index by 40 percentage points since March 2022 – dipped 4% as markets parsed policy commentary from former President Trump and preemptive moves by the Biden Administration to counter this hawkish approach towards China. Leading for a second-straight week, the Small-Cap 600 rallied 2.3% on the week, while the Mid-Cap 400 declined by 0.3%, each chipping away at the historically wide underperformance gap relative to large-cap peers. Real estate equities were also leaders for a second-straight week, lifted by a strong start to REIT and homebuilder earnings season. The Equity REIT Index advanced 1.5% on the week, with 16-of-18 property sectors in positive territory, while Homebuilders pushed their two-week resurgence to nearly 20%.

Bonds were under moderate pressure this week as markets discounted weighted levels of political uncertainty, compounded further by ever-louder calls from Democrat leadership for President Biden to step aside. The 10-Year Treasury Yield rose six basis points this week to 4.24%, while the 2-Year Treasury Yield also climbed six basis points to 4.51%. Swaps markets continue to price-in in a 98% probability that the Fed will cut rates in September – down slightly from last week – and imply 2.44 rate cuts in 2024 – down slightly from 2.50 cuts last week. The VIX – a measure of stock market volatility – jumped to the highest levels since April. Meanwhile, investors parsed a mixed slate of economic data and corporate earnings results alongside a final wave of Fed commentary ahead of the start of the “quiet period” this weekend leading up to their July 31st rate decision. Notably, the Department of Labor reported this week that continuing jobless claims rose to the highest level since November 2021, but retail sales and manufacturing data were surprisingly solid. International economic reports were notably soft this past week, however, including a sizable miss on China’s second-quarter GDP. WTI Crude Oil prices – a key inflation input and useful indicator of global economic activity – slid nearly 3% on the week to below $79/barrel, the lowest level in over a month.

Real Estate Economic Data

Below, we recap the most important macroeconomic data points over this past week affecting the residential and commercial real estate marketplace.

Not exclusive to the political arena, “certainly uncertain” was the theme across economic reports this past week as well. The Department of Labor reported that Initial Jobless Claims jumped to 243k last week – the highest since August 2023 and significantly above estimates – while Continuing Claims rose to the highest level since November 2021. A key look into the health and sentiment of the U.S. consumer, however, data this week showed that Retail Sales were marginally stronger than expected in June following two straight disappointing months. Aided by a strong seasonal adjustment factor, Core Retail Sales rose in June by the most in three months, with spending excluding auto and gas rising 0.8% from the prior month and 3.8% from last year. Total retail sales were flat on the month, however, as weak auto-related spending offset relatively strong trends across brick and mortar categories, led by the home improvement segment. Housing Starts and Building Permits data also topped estimates, as a reported rebound in multifamily construction activity in June offset renewed softness in the single-family segment.

Equity REIT & Homebuilder Week In Review

Best & Worst Performance This Week Across the REIT Sector

As discussed in our Earnings Preview, real estate…