iREIT Daily

There Are No Easy Answers

Brad Thomas

467 postsMarch 18, 2022

I don’t mean to put anyone down, especially institutions that are highly respected for good reason. But I’m taking issue with Fortune’s writeup yesterday that read:

“Stock Markets Are Supposed to Drop When the Fed Hikes Interest Rates. So Why Are They Rallying Now?”

I know everyone wants an answer to the volatility we’ve seen this year. An answer would help us better deal with not just the downs but the ups too – sometimes of the intraday variety that seem so random, they’re mentally and emotionally exhausting.

It’s difficult to feel confident of our financial decisions under such circumstances. (Difficult, but not impossible, mind you.) And so we seek answers.

In fact, seeking answers is the healthy thing to do… just as long as we understand that it might not be an easy journey. That way, we don’t make mistakes like the one Fortune published, which begins with:

Stock markets aren’t behaving the way they’re supposed to.
U.S. markets surged after the U.S. Federal Reserve announced its long-awaited interest rate hike on Wednesday, increasing interest rates by a quarter point and signaling there might be six more rate hikes this year.
In theory, higher interest rates are supposed to make stocks less attractive, because higher rates mean increased borrowing costs for companies and consumers, lowering overall spending. But investors shirked that conventional wisdom and piled into the stock markets, rallying the S&P 500 to close 2.2% higher than the start of the day.

Then it immediately quotes Andrew Hiesinger, CEO of Quant Data, implying that this is the answer:

Usually, the stock market is reflecting what’s best for the economy. So if interest rate hikes are best for the economy, then stocks will respond to that.

To which I have two responses:

The market is hardly always that rational in the moment. As my colleague Dividend Sensei likes to say, “the market is hilariously inefficient in the short-term.” It reacts emotionally in the moment.
We live in an extremely globalized economy. As I said in yesterday’s blog, it’s not just the Fed running the show anymore. And, in the Fortune article’s defense, it does mention that “U.S. markets already [had] started strong… on news of positive movement” between Ukraine and Russia’s ongoing negotiations, “as well as signals from Beijing that it would start to roll back its broad regulatory crackdown.”

But then its very next line is that “rather than worrying that rate hikes would affect equity values, investors may just be relieved that the Federal Reserve is taking action to fight the highest level of inflation in decades.”

Or, perhaps, as I’ve seen others speculate, the markets were relieved that the Federal Reserve isn’t doing nearly enough to fight inflation, leaving stocks to trade at overly elevated prices a while longer.

More Non-REIT News to Know About

Alright then. Enough of that. Let’s move on to our next exceptionally involved topic: Russia. And since I was so long-winded in the last segment, I’m going to use bullet points in this one for brevity’s sake:

Oil is back up over $100 again, supposedly because of the deterioration of peace talks. (Again, I question the simplicity of that answer.)
India’s state-run Indian Oil Corp. reportedly bought 3 million barrels of crude oil from Russia, with plans to buy more.
The U.S. House of Representatives voted 424-8 to suspend normal trade relations, not only with Russia, but also with Belarus. The Senate will vote on it next.
On Tuesday, Ukrainian President Zelenskyy called out multiple big-name companies for remaining in Russia. Many of those businesses have already stated that they provide essential services like food and medicine that should be free from sanctions. Others are simply caught between rocks and hard places, including…
Restaurant Brands International (QSR) says it can’t close down its 800 Burger King restaurants in Russia despite its best attempts. Its independent operator over there has simply refused to comply, leaving the company with little room to push its demands.

There’s also news about China, including Credit Suisse’s (CS) assessment yesterday that the country’s current lockdowns will cost it 0.03%-0.05% in GDP growth per week as-is. And JPMorgan (JPM) expects a “more severe economic shock” this month into next, with a recovery then in May and June.

The way Reuters sums it up is that both banks expect the Covid-19 spike “to have minimal impact on GDP.”

In other news, China’s Xi Jinping and the U.S.’ Biden have a scheduled phone call today to discuss a wide range of topics, including their individual reactions to Russia so far.

The World According to REITs

Next up, of course, we’ve got our real estate investment trusts (REITs) to talk about. There are only a handful reporting anything today…

But here are your standard three (out of four, this morning) The Daily REITBeat provided nonetheless:

Equinix (EQIX) will expand into Chile by purchasing three data centers from Empresa Nacional De Telecomunicaciones for $705 million. The leading Chilean telecommunications provider might also add in one Peruvian asset by the time the deal is complete.
Sunstone Hotel Investors (SHO) sold the 368-room Embassy Suites Chicago and the 361 Hilton Garden Inn Chicago Downtown/Magnificent Mile. Their combined price was $129.5 million. SHO also gave a business update, including how it repurchased 3.2 million shares of its common stock for $35.1 million. And it has $464.9 million left to its existing share purchase authorization program.
Duke Realty (DRE) says Ace Logistics signed a lease for an extra 41,903 square feet at its Chesapeake Commerce Center. As such, DRE’s Baltimore portfolio is 100% occupied.

That’s what we’ve got going on this morning. That and the following…

(Source: The Daily REITBeat)

Happy Investing

Brad Thomas

467 posts

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Brad Thomas is Senior Research Analyst at iREIT and CEO of Wide Moat Research LLC. With over 30 years of real estate experience, he is also long-time Editor of Forbes Real Estate Investor, a monthly subscription-based newsletter that dives deep into the vast world of profitable properties, and since 2021, he has served as an adjunct professor at New York University.

Thomas has also been featured on or in Forbes magazine, Kiplinger's, U.S. News and World Report, Money, NPR, Institutional Investor, GlobeStreet, CNN, Newsmax, and Fox. And he was the #1 contributing analyst on Seeking Alpha in 2014, 2015, 2016, 2017, 2018, 2019, 2020 and 2021 based on both page views and number of followers.

Thomas is the recently-published author of The Intelligent REIT Investor Guide (2021), co-author of The Intelligent REIT Investor (2016), and he wrote The Trump Factor: Unlocking The Secrets Behind The Trump Empire (2016) - all available on Amazon.

Thomas received a bachelor of science in business/economics from Presbyterian College and is married with five wonderful kids.

Bears, Bulls, and Survey Support for Both

REIT Mutual Fund	Symbol
Alpine Realty Income and Growth Fund	AIGYX, AIAGX
American Century Real Estate Fund	REAIX, REACX, AREEX, AREWX, ARYCX, AREDX
Real Estate Securities Fund	MRESX
AR Capital Real Estate Income Fund	ARIAX, ARICX, ARIPX
AssetMark Real Estate Securities Fund	AFREX
Aston/Harrison Street Real Estate Fund	AARIX, ARFCX
Baron Real Estate Fund	BREIX, BREFX
BlackRock Real Estate Securities	BIREX, BAREX, BCREX
Brookfield U.S. Listed Real Estate Fund	BRUAX, BRUCX, BRUIX, BRUYX
CGM Realty Fund	CGMRX
West Loop Realty Fund	REIIX, REIAX, REICX
Cohen & Steers Institutional Realty Shares	CSRIX
Cohen & Steers Realty Income Fund	CSEIX, CSDIX, CSBIX, CSCIX
Cohen & Steers Realty Shares	CSRSX
Columbia Real Estate Equity Fund	CREAX, CREIX, CRRVX, CRERX, CREEX, CRRFX, CREWX, CRECX, CREBX
Compass EMP REC Enhanced Volatility Weighted Fund	CWRAX, CWRIX, CWRTX, CWRCX
Davis Real Estate Fund	RPFRX, DREYX, DRECX, DREBX
Delaware Real Estate Investment Trust Portfolio II	DPRTX, DPRBX
Delaware Real Estate Investment Trust Portfolio	DPREX, DPRSX, DPRRX, DPRCX
DFA Real Estate Securities Portfolio	DFREX
Dunham Real Estate Stock Fund	DAREX, DNREX, DCREX
DWS RREEF Real Estate Securities Fund	RRRRX, RRREX, RRRAX, RRRSX, RRRBX, RRRCX
DWS RREEF Real Estate Securities Income Fund	REFAX, REFCX, REFIX, REFSX
Eaton Vance Real Estate Fund	EAREX, EIREX
EII Realty Securities Fund	EIIRX
Fidelity Advisor Real Estate Fund	FHEIX, FHEAX, FHETX, FHECX, FHEBX
Fidelity Advisor Real Estate Income Fund	FRIRX, FRIQX, FRINX, FRIOX
Fidelity Real Estate Income Fund	FRIFX
Fidelity Real Estate Investment Portfolio	FRESX
Fidelity Spartan Real Estate Index Fund	FSRNX, FRXIX, FSRVX
Fidelity Series Real Estate Equity Fund	FREDX, FREFX
Fidelity Series Real Estate Income Fund	FSREX, FSRWX
Forward Real Estate Long/Short Fund	KSRYX, FRLSX, FFSRX, KSRAX, KSRCX, KSRBX
Forward Real Estate Fund	FPREX, FFREX, KREAX, KRECX
Forward Select Income Fund	KIFYX, FSIMX, FFSLX, KIFAX, KIFBX, KIFCX
Franklin Real Estate Securities Fund	FREEX, FRLAX, FRRSX, FSERX
GMO Real Estate Fund	GMORX
Goldman Sachs Real Estate Securities Fund	GREIX, GRETX, GREAX, GRESX, GRERX, GREBX, GRECX
Great-West Real Estate Fund	MXREX
Heitman REIT Fund	OARTX, OBRTX
ING Real Estate Fund	CRARX, IREWX, IDROX, CLARX, CRWRX, CRCRX, CRBCX
INVESCO Real Estate Fund	REINX, IARFX, IARIX, IARYX, IARAX, IARRX, IARCX, AARBX
Ivy Real Estate Securities Fund	IRSAX, IREIX, IRSYX, IRSRX, IREEX, IRSCX, IRSBX
John Hancock Real Estate Securities Fund	JIREX
Johnson Realty Fund	JRLTX
J.P.Morgan Realty Income Fund	URTLX, JRIRX, URTAX, URTBX, URTCX
J.P. Morgan Security Capital U.S. Core Real Estate Securities Fund	CEEAX, CEERX, CEEFX, CEESX, CEECX
J.P. Morgan U.S. Real Estate Fund	SUSIX
Lazard U.S. Realty Equity Portfolio	LREIX, LREOX
Lazard U.S. Realty Income Portfolio	LRIIX, LRIOX
Manning & Napier Real Estate Series	MNRIX, MNREX
Morgan Stanley Institutional U.S. Real Estate Portfolio	MSUSX, MUSDX, MSULX, MURSX
Natixis AEW Real Estate Fund	NRFAX, NRFYX, NRFBX, NRFCX, NRFNX
Neuberger Berman Real Estate Fund	NBRIX, NBRFX, NREAX, NRERX, NRECX, NRREX
Nuveen Real Estate Securities Fund	FREAX, FARCX, FRSSX, FREBX, FRLCX, FREGX
Oppenheimer Real Estate Fund	OREAX, OREIX, OREYX, ORENX, OREBX, ORECX
PHOCAS Real Estate Fund	PHREX
PIMCO RealEstateRealReturn Strategy Fund	PRRSX, PETPX, PETAX, PETDX, PETCX, PETBX
Pioneer Real Estate Shares	PWREX, PYREX, PCREX, PBREX
Principal Real Estate Securities Fund	PIREX, PIRPX, PREPX, PRETX, PREJX, PRRAX, PRERX, PRENX, PRAEX, PRCEX, PRLEX
ProFunds Real Estate UltraSector ProFund	REPIX
Prudential Select Real Estate Fund	SREAX
Prudential U.S. Real Estate Fund	PJEAX, PJEZX, PJECX, PJEBX
REMS Real Estate Income 50/50 Portfolio	RREIX
REMS Real Estate Value-Opportunity Fund	HLRRX, HLPPX
Rydex Real Estate Fund	RYREX, RYHRX, RYCRX
SA Real Estate Securities Fund	SAREX
SEI Institutional Mgd Real Estate Fund	SETAX, SEIRX
Spirit of America Real Estate Income & Growth Fund	SOAAX
SSgA Clarion Real Estate Fund	SSREX
Stratton Real Estate Fund	STMDX
T.Rowe Price Real Estate Fund	TRREX, PAREX
TIAA-CREF Real Estate Securities Fund	TIREX, TRRPX, TRRSX, TCREX
Vanguard REIT Index Fund	VGSNX, VGRSX, VGSLX, VGSIX
Virtus Real Estate Securities Fund	PHRAX, PHRIX, PHRCX, PHRBX

REIT ETF	Symbol
Flex Shares	ASET
Wisdom Tree Global Ex-US	DRW
S&P 500 Equal Weight	EWRE
iShares FTSE Industrial/Office	FNIO
MSCI Real Estate Index	FREL
S&P REIT Index	FRI
First Trust S&P REIT	FRI
iShares Real Estate 50	FTY
Flexshares Global	GQRE
iShares Cohen & Streers	ICF
iShares International Developed RE	IFGL
iShares US RE	IYR
Premium Yield Equity REIT	KBWY
ETRACS Monthly Pay 2x Leverage	MORL
Market Vector Mortgage	MORT
iShares Global REIT	REET
iShares FTSE Mortgage	REM
iShares Residential	REZ
IQ US Real Estate Small Cap	ROOF
iShares FTSE NAREIT Retail	RTL
DOW Jones Global RE	RWO
SPDR Dow Jones	RWR
Schwab US REIT	SCHH
Super Dividend REIT	SRET
ProShares Ultra RE	URE
Vanguard REIT	VNQ
Vanguard Global ex-US	VNQI
iShares International Developed	WPS
Wilshire US REIT	WREI
Pacer Benchmark Data & Infrastructure RE	SRVR
Pacer Benchmark Industrial RE	INDS
Pacer Benchmark Retail RE	RTL
Hoya Capital Housing	HOMZ
NetLease Corporate RE	NETL

REIT Name	Ticker	Annual Increases/yr
Federal Realty	FRT	51
Universal Health Realty	UHT	33
National Retail Properties	NNN	29
Realty Income	O	27
Tanger Outlets	SKT	26
Urstadt Biddle	UBA	25
Essex Property Trust	ESS	25
W.P.Carey	WPC	22
National Health Investors	NHI	17
Equity Lifestyle	ELS	15
Digital Realty	DLR	15

There Are No Easy Answers

Brad Thomas

467 postsMarch 18, 2022

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There Are No Easy Answers

467 postsMarch 18, 2022

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