The FTSE Nareit All Equity REITs Index declined 1.1% in a volatile July, falling in six of the final seven trading sessions. REITs were up 2.8% before losing 3.8% over this period, in part due to trade concerns and inflation measures posting their largest increase in four months, all of which left investors with some uncertainty as to the timing of future rate cuts from the Federal Reserve.
REITs underperformed the broader stock market as mega-cap technology stocks continued their momentum. While impactful trade disputes remain, the United States and European Union were able to reach an agreement in July, suggesting that progress can be made towards resolving these disputes.
The Dow Jones U.S. Total Stock Market rose 2.3% and the Russell 1000 rose 2.2% in July. On a year-to-date basis, the All Equity REITs index remains in positive territory with a total return of 0.7%, while the Russell 1000 returned 8.5%, and the Dow Jones U.S. Total Stock Market gained 8.1%.
The yield on the 10-year Treasury rose 13 basis points to close the month at 4.36%. As of July 31, the dividend yield on the FTSE Nareit All Equity REITs index was 4.01% and the FTSE Nareit Mortgage REITs Index yielded 12.59%, compared to 1.17% for the S&P 500.
As shown in the chart above, health care now leads on a year-to-date basis with a total return of 16.1%, followed by telecommunications at 15.6%, and diversified at 12.3%.
As reflected in the table above, at the property sector level, health care, diversified, regional malls, and lodging/resorts led in July, while self-storage, apartments, single family homes, and telecommunications lagged.
The FTSE Nareit Mortgage REITs Index rose 2.0% in July and is now up 6.9%, year-to-date. Home financing climbed 3.7% and commercial financing fell 1.4%. For the year, home financing is up 11.4% and commercial financing is down 1.0%.