Panem et Circenses. Economic data released during the quarter was somewhat weak, headlined by an “advance” estimate for First Quarter 2017 GDP growth of just 0.7%, well below the consensus estimate of 1.0%. While projections have since been revised up to 1.4%, it is still below the average GDP growth of 1.9% and 1.6% in 2015 and 2016, respectively. The May nonfarm payroll number of 138,000 (compared to consensus estimates of 185,000) also proved disappointing during the quarter; again, that figure has since been revised up to 152,000 but it is still below the averages of 226,000 and 187,000 in 2015 and 2016, respectively. Based on the weak numbers, the yield on the 10-Year Treasury Note fell for the second straight quarter from 2.396% to 2.302%.
Global property securities delivered positive returns for the quarter despite continued uncertainty regarding the path forward for interest rates and the pace of economic growth. While the global economy continues to push forward at a steady pace, the lack of any acceleration and a benign inflationary environment is putting central banks in a delicate position and leaving some doubt for any meaningful increase in long term rates in the near term. Although there was wide performance dispersion among countries around the globe, Europe stood out as the best performing region, benefitting from improving economic data in the Eurozone and a moderation of political risk following the French elections. The retail sector remained the most unloved property sector globally, while the broader equity markets continued to outperform both bonds and property securities.