US Real Estate Investment Trusts Led Risk Rally Last Week

After three weeks of losses, real estate investment trusts (REITs) in the US bounced last week, posting the strongest gain for the major asset classes, based on a set of exchange-traded funds.

Vanguard US Real Estate (VNQ) jumped 5.2%, the first weekly advance for the fund in four weeks, based on US trading through the July 2 close.

The rally comes at a time of heightened uncertainty for commercial property. As The Economist notes, the coronavirus pandemic “has severely impaired tenants’ ability to pay rent. It also raises questions about where shopping, work or leisure will happen once the crisis abates.”

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Meanwhile, prices across most of the major asset classes rose last week. Broadly defined commodities (GSG) and US equities (VTI) participated in the rally, posting the second- and third-best gains for the shortened US trading week. The only exception: a fractional loss for foreign government bonds in developed markets: SPDR Bloomberg Barclays International Treasury Bond (BWX) shed one basis point last week.

The broad upswing in markets lifted the Global Markets Index (GMI.F). This unmanaged benchmark, which holds all the major asset classes (except cash) in market-value weights via ETFs, gained 2.5% – the index’s best weekly advance in six weeks.

For the one-year trend, US bonds continue to lead. Vanguard Total Bond Market (BND) is up ahead by a strong 8.9% over the trailing 12-month period, based on total return. US inflation-indexed Treasuries are a close second-place performer: iShares TIPS Bond (TIP) is up 8.6%.

Broadly defined commodities are still posting a deep one-year loss. The iShares S&P GSCI Commodity-Indexed Trust (GSG) was down 32% at last week’s close vs. the year-earlier price–the worst performance for the major asset classes over this railing period.

Meantime, GMI.F’s one-year return is a modest 3.0% gain.

Ranking asset classes by current drawdown continues to show a wide range of results, ranging from a 50%-plus peak-to-trough decline for commodities (GSG) to a near-zero drawdown for US investment-grade bonds (BND).

GMI.F’s current drawdown: -5.9%.

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