Post by
DZtrader on Apr 18, 2024 6:03pm
Reits catch a bid in the face of rising yeilds
What does this mean.......................................well, maybe nothing, it's surely too early to tell. Easy enough to say it's just a bounce off an oversold state, and that could be true, but also one could argue that the sector if not certain reits have been oversold for quite some time now. What did strike me as a bit curious though is that the markets in general look like they want to roll over a bit here, or at minimum pull back a bit and take a breather. Combine this with the fact that bond yeilds rose again today and you have to admit it makes a bit of a compelling story. In fact, when was the last time we saw yeilds pushing ever higher into a receding market that reits not only didn't go down but actually reversed early weakness and closed positive. Earth shattering, hardly, but interesting and encouraging, for sure. Firstly, as I noted awhile back, I think we have to start to recognize two very distinct set of circumstances or economies between Canada and the U.S. The debate will rage on in the U.S. between cuts, when, how much if ever.....................here I believe it is almost a foregone that we go by June. I would be much more surprised if we didn't than if we did. That being the case CAD reits "should" still maintain a cautiously optimistic tone and a rally today shouldn't have come as a huge surprise. Interestingly enough, my now one and only U.S. reit has been rallying pretty good the last couple days into the same higher for longer narrative as well. Yes I know, far too early to read anything much into this.
I think the market is coming to terms in the U.S. with cutting cycle likely being pushed back while Canada (and other economies) are clinging to hopes we go by June. In the meantime companies and businesses have trimmed and become leaner and more efficient in this environment and thus earnings continue to hold up for the most part as has labor. This being the case and we level out here, be it now or in the near term and we have positioned and absorbed the hits that higher rates have inflicted (and I am speaking predominantly about reits here and moreso CAD reits) there WILL COME a point in time that valuations do matter. Reits unfortunately had/have come under a perfect storm of circumstances of not only high rates but also fear of tight liquidity at a time of dangerously high debt roll over along with the ongoing "office debacle" all leading to as much negative sentiment I have seen on a sector in quite awhile. Some of this still exists but it is known and it is slowly being dealt with and accounted for.
I personally don't mind collecting healthy distributions while I wait. While I haven't gone off the deep end acquiring, I have been adding at these fairly attractive entry points of late. Sure, maybe this sounds a bit like a broken record, I get it. We have had no less than three false starts here. I don't blame anyone for biting earlier, I did too, because the conditions appeared right, but absolutely NOTHING of late (and I mean at least two or three years or more) has made sense or done what we have come to expect, largely because of the manipulation of most everything, and this is what you get as a result of it.
So maybe just maybe as is often the case, when we ARE NOT expecting it, the move starts to happen. Today we moved higher with all the negative forces at work including (Rumpled himself) in the face of climbing yeilds. We did something today that we maybe shouldn't have, we reversed higher in the face of adversity, I like that! Does this last even into tomorrow, not sure but I do see it as a sign of things to come in particular with trillions sitting in money markets and the potential rotation out of some over bought high flying stocks and sectors.
Broken record, maybe, but I like accumulating as near to the bottom as I can, even if we get a false start (or three). Things take time, like accumulating wealth, "the old fashioned way". Just don't call me old!
Stay good,
DZ
Comment by
ScroogeMcDuck1 on Apr 18, 2024 6:14pm
I agree with this to a degree, but many reits fell. I can explain the office stuff by the fact that a pundit on BNN stated office reits are a compelling buy. Offics stuff outperform today. We are so illiquid that one video can do that. Its a blend of these facts as you say... oversold again and timing.