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Realist Roundup: The federal shutdown's impact on REITs

Part 6
Realist Roundup: The federal shutdown's impact on REITs (Part 6 of 7)

Preview of the week ahead: All about the September FOMC minutes

Next week is all about the FOMC (Federal Open Market Committee) minutes

The FOMC (Federal Open Market Committee) will release the minutes from the September meeting on Wednesday. The Fed-speak indicates that it was a close call between tapering at the September meeting and not. Market participants will parse the minutes closely, although the government shutdown pretty much takes any immediate actions off the table. Earnings season officially kicks off with Alcoa reporting on Tuesday. We’ll hear from JP Morgan and Wells Fargo on Friday, which should give some insight into how the mortgage business is going.

Fed GDP ForecastEnlarge Graph

Economic data this week

Monday, October 7

  • Payroll report (if the government reopens)
  • Construction spending
  • Factory orders

Tuesday, October 8

  • NFIB Small Business Optimism
  • Trade balance
  • IBD/TIPP Economic Optimism
  • JOLT Job Openings

Wednesday, October 9

  • MBA Mortgage Applications
  • Minutes from the September FOMC meeting
  • Wholesale inventories

Thursday, October 10

  • Initial jobless claims
  • Bloomberg Consumer Comfort
  • Monthly budget statement

Friday, October 11

  • Producer Price Index
  • Retail sales
  • Business inventories
  • University of Michigan Consumer Confidence

Earnings releases this week

Friday, October 11

  • JP Morgan (JPM)
  • Wells Fargo (WFC)

Implications for mortgage REITs

For the mortgage REIT sector, there isn’t much to worry about this week. Non-agency REITs like Chimera (CIM) and PennyMac (PMT) will watch some of the more macro data like retail sales. Agency REITs like Annaly (NLY) and American Capital Agency (AGNC) won’t care, although they will parse the FOMC minutes closely. Nothing releasing this week will affect any decision-making at the Fed.

Implications for homebuilders

The builders like Lennar (LEN) and KB Home (KBH) aren’t going to focus all that closely on the minutes of the FOMC, as they’re not that sensitive to quantitative easing. But they will take a close look at any analysis behind the changes to the Fed’s economic forecasts. Builders are highly cyclical stocks, and signs of economic weakness are negative for them. They’ll focus on construction spending and retail sales.

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