American real estate prices have an important story to tell

Today’s issue in preview:

• American real estate prices have an important story to tell

• Shopping mall operators soar to new highs. This is bullish, not bearish

• This theme is rising while most everything else is falling. That’s bullish

American real estate prices have an important story to tell

Credit:Boris_Zec

All the good times… and all the bad times.

Every industry boom and every industry bust.

They all make their way into real estate prices.

They all end up making landlords a lot richer… or a lot poorer.

Identifying and profiting from giant technology and business trends is our stock in trade here at Money & Megatrends. When this is how you earn a living, real estate prices are a key part of your analytical “toolbox.”

Real estate investment vehicles – whether publicly or privately traded – can be excellent ways to trade big industry and technology trends. The ripple effects of every boom and every bust eventually make their way into real estate prices.

For example, when oil is in a bull market, prime real estate in Houston, the oil industry hub, does well. When corn and soybeans are in bull markets, land in Iowa soars in value. The value of prime properties in Silicon Valley and San Francisco rises and falls with the valuations of big tech companies. The massive expansion of the Chinese steel exporting industry in the late 1990s and 2000s was terrible for real estate prices in U.S. steelmaking capital of Pittsburgh.

The list of such “cause and effect” examples goes on for miles.

Yes, real estate is essentially a “catch basin” where money flows in or out, depending on a region or industry’s economic health and prospects.

With this in mind, let’s size up the health of American real estate. Is the trend here in good health or in poor health?

The price action of the Invesco S&P 500 Equal Weight Real Estate ETF (RSPR) has the answer.

RSPR is an ETF that holds about 30 of America’s largest REITs. A REIT is a bundle of real estate assets that trade as a single security. REITs own, operate, or finance income-producing real estate – such as apartments, office buildings, shopping centers, warehouses, or data centers – and allow investors to buy shares in those real estate portfolios.

RSPR’s constituents are the “who’s who” of big U.S. real estate firms. They own and manage all kinds of real estate across the country. Apartment buildings. Office buildings. Hotels. Health care facilities. Shopping malls. Warehouses. Public storage facilities. Timberland. Communication infrastructure. Laboratories and research facilities.

This broad diversification means the fund rises and falls with overall American economic health.

As you can see in the 4-year chart below, American economic health is solid. RSPR has returned 9.4% year-to-date and has rallied over the past two months to close near its all-time high. Obviously, there are some things going right for the owners of apartments, offices, hotels, and the like.

Are there big problems and imbalances in the U.S. economy? Absolutely. There are always big problems and imbalances in the U.S. economy.

Economic growth and rising asset prices are never the result of being in problem-free economic climates. They’re about being in economic climates where the big negatives are overwhelmed by the even bigger positives. The rising values of leading real estate firms indicate this is the case in America. Conduct your financial affairs accordingly.

Shopping mall operators soar to new highs. This is bullish, not bearish

Credit: IGphotography

If the broadly focused REIT funds such as RSPR (covered above) have a good story to tell today, then narrowly focused shopping mall REITs have a great story to tell.

This morning, Simon Property Group (SPG), Macerich (MAC), Kimco Realty (KIM), and Tanger Factory Outlet Centers (SKT) each surged more than 3% to reach new all-time highs. These three companies are among America’s largest shopping center owner/operators. And their businesses are booming.

Their new highs are an important piece of new information in one of the world’s most important financial debates. The outcome of the situation being debated has huge consequences for your portfolio and the economy.

You could call this debate “The Doomers vs. The Optimists.”

The Doomers say the Iran War’s constriction of critical Middle Eastern resources such as oil, natural gas, fertilizer, sulfuric acid, and helium will lead to serious economic disruption and then a recession and then a bear market.

The Optimists say those concerns are overblown… a diplomatic solution is on the way… and the economy and stock market will continue growing.

Right now, we can look at new highs for major shopping center operators and say the market is clearly siding with the Optimists.

We can also say the common bearish forecasts about the American consumer are way off the mark.

I’ve been investing and reading financial research for 28 years. During all that time, I’ve heard many famous pessimists forecast the death of the American consumer. They’ve all been consistently wrong. Not even the dot.com crash or the 2008 financial crisis could knock out the consumer.

This is why I like to say that in the event of global thermonuclear war, two things will survive: cockroaches and the American consumer.

The super resilient American consumer is a friend to all the companies mentioned above.

Collectively, these four companies operate a big portion of America’s shopping centers. This means their fortunes rise and fall with the consumer’s capacity and propensity to blow $1,000 at the mall. And their respective stocks reached new all-time highs this week.

The robust health of mall operators is in stark contrast to the media’s constant reporting of struggling consumers. What the media says is the opposite of reality. It’s a shocker, I know.

As an investor, you can base your decisions on bearish stories written by journalists who don’t know much about making money in stocks. You can base your decisions on forecasts issued by professional pessimists who predict nothing but doom and gloom.

Or, you can focus on reality. You can focus on what’s happening in the real world. Right now, reality says shopping mall stocks are at new highs and the consumer is doing just fine.

This theme is rising while most everything else is falling. That’s bullish

As we go to press, many stock market sectors are having a terrible day. The Technology Select Sector Fund (XLK) is down 5.7%.

The space ETF we follow is down 6.2%.

The software stock fund we follow is down 5%.

The robotics fund we follow is down 4.2%.

The broad market fund we follow is down 1.9%.

Health care, however, is serving as a “port in the storm.”

Today, the world’s largest health care-focused ETF – the Health Care Select Sector SPDR Fund (XLV) – advanced 0.85% and just reached its highest level in two months. Plus, the Invesco Pharmaceuticals ETF (PJP) – a fund loaded with big drugmaker stocks – is up 0.9% and reached an all-time high today.

About three weeks ago, on May 13, I suggested the health care sector was due for a rebound and trading it from the long side made sense. Helped by today’s strength, this trade idea has become a solid winner. Our commentary from yesterday about this trend still holds. It goes as follows:

Health care’s relative strength is a good reminder of why “Boomer health care” is a compelling long-term investment theme. Regular readers are familiar with the bull case here. More than 10,000 Americans reach retirement age every day. The U.S. population aged 80 and older is projected to roughly double, from 14.7 million in 2025 to 29.4 million by 2045.

This is the enormous Baby Boom generation entering the phase of life where health care and longevity spending skyrockets. For many boomers, a typical month involves going to see at least one doctor to have something looked at, removed, or treated.

This means many health care businesses are experiencing huge demand now – and will for at least the next decade. It means boom times ahead for many “ology” businesses, stocks, and careers. Dermatology. Cardiology. Radiology. Oncology. Anesthesiology. Ophthalmology. The list goes on.

Given all this, I believe investing in well-positioned health care businesses is heavily rigged in your favor to the upside. Today’s trading helps make that case. I’m still bullish on health care.

Market Notes

• Hotel giants Marriott (MAR) and Hilton (HLT) reached new all-time highs today. These are bullish economic signals.

• Natural gas producers Expand Energy (EXE) and Comstock Resources (CRK) reached new one-year lows today.

• Construction management software giant Procore (PCOR) reached a new one-year low today.

• Home retail giant Home Depot (HD) bucked the broad market selloff and climbed 2.9% today.

Regards,

Brian Hunt
Editor, Money & Megatrends

An urgent message from our colleagues:

Trump named it. Scientists built it. Here’s what it means for you.

The name is “Golden Dawn.” That’s what President Trump’s team is calling America’s new Manhattan Project – but for AI. It will span more than 700 miles – making it by far the largest AI infrastructure project ever built. When Trump flips the on switch, Louis Navellier believes it will trigger a $100 trillion reset of the AI markets. For investors who get ahead of it, the timing could mean everything.

Louis’ revealing the one stock at the center of it all right here.