RWT - Staring Down Stagflation

• U.S. equity markets declined for a fourth-straight week as lukewarm earnings results from mega-cap technology companies and downbeat economic data- including a GDP contraction- raised further concerns about emerging stagflation.
• Logging its worst month since the depths of the pandemic in March 2020, a deepening tech-rout dragged the S&P 500 lower by 3.3% this week- 14% below its recent highs.
• Real estate equities snapped a stretch of outperformance with broad-based declines on the week despite very strong earnings and M&A. The Equity REIT dipped 5.3% while Mortgage REITs declined 2.1%.
• Amid the equity market rout, however, bond markets were relatively steady while currency markets reflected growing expectations of U.S. economic outperformance with the U.S. Dollar strengthening to near-two-decade highs.
• Homebuilders - and the broader housing sector - were a source of strength on an otherwise dim week. Home sales data and earnings reports from builders confirmed that demand remains surprisingly resilient despite the surge in mortgage rates.

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