Market Update: Jan 29 2021
- Corporate Earnings
- Real Estate
Here is a recap of our live Q&A session held on 1/29/21 presented by Joe Randazzo JD, CFP® from FNA Wealth Management and Dave Stone CPA, CFP® from Tartan Wealth Management.
Details for our next session, 2/12/21, can be found here.
What has been driving the market since our last call?
- Corporate earnings are front and center as this week over 100 companies in the S&P 500 report including Apple, Tesla, and Facebook. So far this quarter, earnings announcements have beaten expectations 88% of the time. For companies that have not beaten earnings expectations, their stocks have been punished.
- The distribution and administration of the vaccines has generally not happened as quickly as expected. This has prompted a shift from the value/cyclical names back to tech as the market leaders. We believe technology is the work-from-home driver and has become the default trade when it appears that it will take longer for economic recovery. The 10 year treasury yield has fallen some, also likely due to issues with vaccines.
- The expectation of a stimulus package has been another driver of the market since inauguration of Biden as President. He is proposing a $1.9 trillion package. This stimulus should benefit cyclicals and small companies if it passes.
Is real estate an attractive investment if interest rates rise?
Real estate has traditionally performed well in inflationary environments, especially in sectors like multifamily that usually have shorter lease cycles. The impacts of COVID-19 on the economy have impacted office and hospitality real estate as many people are working at home and not travelling. The need for these types of real estate has changed and challenges are ahead in their recovery.
We like multifamily and industrial properties as the best way to participate in real estate in your portfolio. Multifamily is attractive as the population continues to grow. Many millennials are renters and they tend to rent for longer periods as they delay getting married until later in life. Multifamily leases are usually shorter term which allows for rising rents in inflationary periods. Industrial properties or distribution warehouses are in high demand as more consumers shop online and their orders are fulfilled from a warehouse. As more commerce is transacted online, the need for more warehouses should continue to grow.
We believe that high quality real estate should be part of most client’s portfolios. Real estate typically would provide current income with some potential for appreciation.
The views and opinions expressed herein are those of the author(s) noted and may or may not represent the views of Capital Analysts or Lincoln Investment. The material presented is provided for informational purposes only. Nothing contained herein should be construed as a recommendation to buy or sell any securities. As with all investments, past performance is no guarantee of future results. No person or system can predict the market. All investments are subject to risk, including the risk of principal loss.
Investing in the real estate market can be more complex than the securities markets, especially in terms of liquidity and flexibility.