REITs Surged Amid Mixed Run For Major Asset Classes Last Week

US real estate investment trusts (REITs) rebounded in last week’s trading (through Mar. 12), posting the best performance by far for the major asset classes, which delivered mixed results overall, based on a set of proxy ETFs.

After slipping for three straight weeks, Vanguard US Real Estate (VNQ) rebounded sharply, rising 5.5% for the trading week. Although the fund has yet to regain its pre-pandemic high, VNQ rallied to its highest close since markets began rebounding in late-March 2020.

Most slices of the major asset classes rose last week, including US and foreign stocks, commodities and foreign property shares. The big loser: investment-grade bonds in the US.

Vanguard Total US Bond Market (BND) continued to tumble, shedding 0.5% last week. The decline marks the ETF’s sixth straight weekly loss.

Driving bonds lower: rising interest rates, which move inversely with prices for fixed-income securities. The latest slide in bond prices comes ahead of this week’s Federal Reserve meeting, policy announcement and press conference on Wednesday, Mar. 17. The news that day will be closely read as investors try to gauge the outlook for inflation, interest rates and monetary policy.

“The Fed is aiming for higher inflation, which means higher interest rates,” predicts Steven Ricchiuto, chief U.S. economist for Mizuho.

The Fed is widely expected to leave its target rate unchanged at the current 0%-to-0.25% target range. Fed funds futures, for instance, are pricing in a 100% probability of no change in rates on Wednesday. Nonetheless, analysts are debating if a sooner-than-expected rate hike is brewing down the road.

“The risk obviously is that a rate hike appears in the 2023 forecast on the back of the recently passed fiscal package,” writes economist Tim Duy in research note for clients via SGH Macro Advisors. “I think the Fed will resist that outcome.”

Meanwhile, the Global Markets Index (GMI.F) continued to rise last week, posting a solid 2.1% gain. This unmanaged benchmark holds all the major asset classes (except cash) in market-value weights via ETF proxies.

1 2
View single page >> |

Disclosures: None.

How did you like this article? Let us know so we can better customize your reading experience.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.