Monthly Agenda March 2021 - International Equities
Homebuilders started outperforming the broader market late last year as locked-down buyers with access to money sought better living conditions. And they haven’t let up since with the S&P homebuilder index surging 19% thus far this year versus a 5.7% rally in the S&P 500.
Even the January reading of the S&P CoreLogic Case-Shiller index, which climbed the most since 2014 in December, is expected to show yet another 10% increase. Pandemic-driven demand for more space, growing millennial need for housing, relatively low interest rates and a limited number of homes for sale are all contributing to higher single-family house prices, which is of course great for builders.
Chart 8: Builders rally ahead of broader market (Index 16/03/20=100)
Enlarge Source: Bloomberg
Chinese stocks are trailing U.S. peers this year. Economic data out of China have been underwhelming relative to the U.S. The outlook for the U.S. economy has improved of late on the back of the latest round of fiscal stimulus, while the Fed remains accommodative. Plus, the country’s vaccinations are accelerating, which could further enhance prospects for a recovery.
Meanwhile, China’s conservative growth target for 2021 and the growing concerns over tighter liquidity are weighing on local equities. Concerns for tech stocks in particular centre around the move up in bond yields globally and clampdowns on some large companies.
Chart 9: Chinese equities struggle (CSI 300 Index)Enlarge Source: Bloomberg
Bloomberg’s hotel REITs index plummeted into the end of 2019, when reports of the coronavirus began surfacing, compared with a smaller drop for the broader REIT index.
All that changed on November 9, 2020, also known as “Pfizer Monday”, when the first real encouraging vaccine news broke. Since then, the hotels REIT is up 69% compared with 10% for the broad REITs index and 14% for the S&P 500. This is what reopening enthusiasm looks like.
Chart 10: US Hotel REITS win on re-openingEnlarge Source: Bloomberg
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