The market is upset again about trade as another round of tariffs was issued by China on U.S. goods.  I don’t see this as all that impactful even for the goods targeted by the tariffs.  China already had a 25% tariff on soybeans and corn, which already made their imports of the commodities minimal.  An additional tariff on top of the existing 25% will simply keep the imports of the commodities minimal.

To illustrate, let us imagine China put a 10,000% tariff on certain products.  The volume of those products traded bilaterally would simply drop to zero.  Once it is at or near zero, no more harm can be done from tariffs even if the numbers are as absurd as 10,000%.

In this particular Friday drop, the market correctly discerned that REITs are less exposed to geopolitical issues as the sector dropped significantly less than the broader market.

The other big news today was the Fed discussion at Jackson Hole.   Commentary was right down the middle with room for interpreting it as either hawkish or dovish.  I saw Powell’s commentary as a bit more on the dovish side while a couple other Fed members had more hawkish commentary.  These things are hard to predict, but I feel like 50 basis points is no longer in consideration, but a 25 basis point cut in September still looks likely.  Interest rates are likely to remain low for the foreseeable future which may accelerate the flow of assets into REITs.

At a more granular level, retail fundamentals came in rather strong.  The consumer is still spending and the wage growth of recent years is enabling the spending.  In the earlier part of the week, retail REITs were having a nice rally.  There seems to be renewed buying interest in PEI particularly.  It even managed to escape today’s downdraft roughly flat.

Overall, the economy and fundamentals look okay; growing at a moderate pace.  The numbers do not look concerning to me, but I wouldn’t expect rapid growth in the near term.

2CHYP Portfolio Snap Shot

 2CHYP Performance inception through end of July 2019

2CHYP Weekly Trade Confirmation Report:  No trades this week.