After a start to the year where the equity markets moved close to hitting year-end targets in one month, volatility returned with a vengeance, spurred most likely by the release of the Employment Situation Summary on February 2nd reporting a 2.9% year-over-year increase in average hourly earnings. Everyone became a Philips Curve acolyte and fears of runaway inflation took hold, leading to a sharp correction in risk assets. For the rest of the quarter, financial markets were buffeted by the daily drama emanating from the White House and shaken by the specter of trade wars and untested leadership at the FOMC; as First Quarter drew to an end, investors were left eagerly awaiting earnings with risk assets trading near February

After nearly five months of behind-the-scenes negotiations, regional mall REIT GGP Inc. (GGP, formerly known as General Growth Properties) recently agreed to be acquired by its largest shareholder (34% owner, originated from its role as plan sponsor and cornerstone investor during GGP’s bankruptcy reorganization and recapitalization in 2010, including the receipt of 57.5 million warrants with an exercise price of $10.75/share for its $2.3 billion investment) Brookfield Property Partners (BPY) at a price that underwhelmed the investment community; the regional mall REIT sector declined 2.6% on the day of this news, with GGP falling even more at 5.3%. Source: FactSet. While the updated “headline” offer of $23.50/share in cash is slightly higher than the initial $23.00/share cash or BPY unit

Risk assets enjoyed a smooth upward ride in Fourth Quarter. Investors are learning to ignore short-term political volatility and any suspense surrounding intermediate-term uncertainty involving the next chairman of the FOMC and the Republican tax plan seemed manufactured at best. There was some passing of the baton back and forth between secular growth (FANG stocks) to cyclical (airline, oil stocks, etc.) but in reality, there was just too much money chasing too few goods as amply demonstrated by the meteoric rise of crytocurrencies, breathlessly covered by CNBC reporters. Economic data released during the quarter was good. The third estimate of Third Quarter GDP growth came in at 3.2%, compared to 3.1% for Second Quarter 2017 and average GDP growth of

During their last meeting of 2017 held on December 12-13, the Federal Open Market Committee decided to raise the target range for the federal funds rate another 25 bps. There were two dissenters to the decision, Charles Evans and Neel Kashkari, both citing a rate of inflation well below the Committee’s 2% target. Governor Kashkari also cited concerns about a flattening yield curve which he speculated was “partly due to falling longer-term inflation expectations or a lower neutral real rate of interest.” Counterbalancing those concerns are thoughts and observations that financial conditions are still too accommodative, resulting in elevated asset prices with very little volatility; even the conundrum of the flattening yield curve can be explained by “large holdings of

Third Quarter 2017 is the fifth in a row that the Wilshire US REIT Index has underperformed the S&P 500 Index, an unprecedented losing streak based primarily on the assumption that deregulation and tax cuts at home and a broad based economic recovery abroad will jump start an economy (and earnings) in its eighth year of expansion, leading to outsized benefits for the tenants rather than the landlords. The sharp rally in the S&P 500 Index is somewhat surprising in the face of geopolitical turmoil and dysfunction in Washington D.C.; when interviewed on Bloomberg Television, the newly minted Nobel Laureate in Economics, Richard Thaler, stated, “We seem to be living in the riskiest moment of our lives, and yet the