Volatility Is Back

2025-02-02 09:00:00 ET

Summary

• US equity markets posted modest declines this week amid a "DeepSeek" tumble, while interest rates declined to six-week lows as markets responded to the pause in the Fed's rate-cutting cycle.
• The Nasdaq 100 was the center of the action this week, dipping 1.4% on concern over potential competition from Chinese startup DeepSeek, which sparked a sharp sell-off in AI-darlings.
• Real estate equities were among the stronger performers for a third-straight week, buoyed by easing interest rates and by a relatively solid start to REIT earnings season.
• The physical epicenter of AI, data center REITs were slammed this week on concerns that advances in computing efficiency claimed by Chinese firm DeepSeek would imply reduced space needs.
• Residential Mortgage REITs rallied this week after the initial slate of results were surprisingly strong, given some stiff macro headwinds on MBS valuations. Annaly Capital jumped 5%, while Rithm Property Trust surged 10%.

Real Estate Weekly Outlook

US equity markets posted modest declines this week amid a "DeepSeek" tumble in AI-focused technology stocks, while benchmark interest rates declined to six-week lows, as markets responded to the Federal Reserve's decision to hold rates steady alongside a tweak in its policy statement, and parsed the impacts of sweeping tariffs on China, Mexico, and Canada. Treasury yields briefly spiked mid-week after the FOMC's policy statement indicated a marginally more hawkish view of economic conditions - changing its assessment of labor market conditions to "solid" from "generally easing" and removing a reference to "progress" towards its 2% policy objective - but eased after Chair Powell clarified that these changes aren't meaningful signals....

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