REITs Experience Volatile July Amid Trade Concerns and Inflation

Strategic Insights -

The FTSE Nareit All Equity REITs Index declined 1.1% in July, falling in six of the final seven trading sessions, as REITs underperformed the broader stock market despite the United States and European Union reaching an agreement on trade disputes. The market volatility was fueled by concerns over trade and inflation, which led investors to question the timing of future rate cuts from the Federal Reserve. Meanwhile, mega-cap technology stocks continued to exhibit momentum. The Dow Jones U.S. Total Stock Market rose 2.3% and the Russell 1000 rose 2.2% in July, while the All Equity REITs index remains in positive territory with a total return of 0.7% year-to-date.

Key Takeaways:

  • The FTSE Nareit All Equity REITs Index declined 1.1% in July, contrary to the broader stock market, which rose 2.3% (Dow Jones U.S. Total Stock Market) and 2.2% (Russell 1000).
  • REITs underperformed the broader stock market amid trade concerns and inflation measures posting their largest increase in four months.
  • Mega-cap technology stocks continued to exhibit momentum, contributing to the volatility in the market.
  • The year-to-date total return for the All Equity REITs index is 0.7%, lower than the returns for the Russell 1000 (8.5%) and the Dow Jones U.S. Total Stock Market (8.1%).
  • The dividend yield on the FTSE Nareit All Equity REITs index was 4.01% as of July 31, compared to 1.17% for the S&P 500.
  • Health care now leads on a year-to-date basis with a total return of 16.1%, followed by telecommunications at 15.6% and diversified at 12.3%.
  • The FTSE Nareit Mortgage REITs Index rose 2.0% in July and is now up 6.9% year-to-date.
  • Home financing climbed 3.7% and commercial financing fell 1.4% in July.
  • For the year, home financing is up 11.4% and commercial financing is down 1.0%.

Statistics:

  • The 10-year Treasury yield rose 13 basis points to close the month at 4.36%.
  • The FTSE Nareit All Equity REITs Index yield was 4.01% as of July 31.
  • The FTSE Nareit Mortgage REITs Index yield was 12.59% as of July 31.
  • The S&P 500 yield was 1.17% as of July 31.
  • The total return for the All Equity REITs index is 0.7% year-to-date.
  • The total return for the Russell 1000 is 8.5% year-to-date.
  • The total return for the Dow Jones U.S. Total Stock Market is 8.1% year-to-date.

Sources:

  • National Association of Real Estate Investment Trusts (NAREIT)