CMTG - Tale Of Two Economies

2024-02-25 09:00:00 ET

Summary

• U.S. equity markets rallied to record highs this week while interest rates remained near three-month highs after earnings results from tech firms rekindled an AI-fueled rally, offsetting "high for longer" concerns.
• After snapping a five-week winning streak in the prior week, the S&P 500 rebounded 1.7% this week. Gains were notably top-heavy, however, as the Small-Cap 600 dipped nearly 1%.
• Remarkably, the Nasdaq 100 extended its 52-week outperformance over the Small-Cap 600 Index to 45 percentage points, the widest performance dispersion since the "dot-com" period in 1999.
• This "tale of two economies" was exhibited vividly across earnings reports this week, which showed notable outperformance from high-margin services-oriented segments - tech, leisure, and advertising - and surprising weakness from many goods-oriented and capital-intensive segments - farmland, office, and cold storage.
• While a dividend cut from commercial lender Ares Commercial fueled another wave of downbeat press commentary focused on "CRE distress," this weakness has remained the exception among public REITs. Eight REITs hiked their dividends this week, while nearly 70% of REITs have topped earnings expectations.

Real Estate Weekly Outlook

U.S. equity markets rallied to fresh record-highs this week while interest rates remained near three-month highs after earnings results from mega-cap tech firms rekindled an AI-fueled rally, offsetting "high for longer" concerns that continued to weigh on rate-sensitive segments of the economy. This "tale of two economies" was exhibited vividly across earnings reports this week, which showed notable outperformance from high-margin services-oriented segments - tech, leisure, and advertising - and surprising weakness from many goods-oriented and capital-intensive segments - farmland, office, and cold storage....

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