REITs Continue To Rally On Greater-Than-Expected Inflationary Data

The major real estate investment trusts (REITs) started to rally after the Oct. 13, 2022, consumer price index report from the U. S. Bureau of Labor Statistics, despite the slightly hotter-than-expected September inflation number of 8.2% year-over-year figure versus the expected 8.1% year-over-year. The previous month had come in at 8.3%. Core inflation hit 6.6%, although estimates had been at 6.5%. August hit a rate of 6.3%, so this move up is concerning.

Although this means the Fed is highly likely to keep raising interest rates, that didn’t stop REITs or the rest of the stock market from staging an extraordinary rally. The iShares U. S. Real Estate ETF IYR, a benchmark for the sector, is up 3.8% since the announcement. Each of the 11 major REITs followed here ended the trading session on Oct. 12 in the green, a rare positive showing for the entire group. 

It’s surprising to see this kind of bullish action when the CPI figures are broken down. For example, the price of food at home gained by 13% annualized. The price of food away from home increased at a rate of 8.5%. Gasoline was up by 18.2% and electricity by 15.5%. If you had to buy new clothes, they increased by 5.5%, and if you bought a used vehicle, it was 9.4% greater.

Nonetheless, investors used the report to buy REIT shares and other stocks throughout the day.

The exchange-traded fund (ETF) seems to have come out of the relative strength indicator (RSI) oversold level with a positive divergence in price. Can this sector benchmark keep going and make it back up to those declining moving averages? That’s what investors will be watching.

The biggest up move among the major REITs was from ProLogis Inc. PLD: The big industrial REIT is up 5.3% since the report.

Healthpeak Properties Inc. PEAK is another REIT that found buying strength and is now up 4.44%. Healthpeak pays a 5.25% dividend at its current price.

Another winner is Kimco Realty Corp. KIM, which is now up 4.21%. 

Weyerhaeuser Co. WY is trading higher by 1.33%. Here’s the daily price chart:

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It’s odd to see this kind of buying when the CPI figures reveal continued inflation; this kind of behavior almost certainly means higher interest rates in the offing. It may be that investors believe the worst is over and that a Fed pivot to lower rates would happen sooner than previously thought. 

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Not investment advice. For educational purposes only.

This article was originally published on Benzinga