Weekly Market Update

The rollercoaster ride continues as this week saw the S&P 500 register its worst day since April 2020 (-2.9%) followed two days later by the index’s best day since June 2020 (+2.6%). The market continues to be very sensitive to headlines out of Ukraine, with sentiment shifting wildly on hopes for diplomatic de-escalation or oil supply headlines and as a result, global markets are seeing sharp intraday price swings. Ultimately, however, a historic surge in commodity prices, particularly energy and agricultural products, coupled with Thursday’s consumer price index (CPI) indicating new 40-year highs in inflation (7.9%), weighed too heavily on investors and the S&P 500 closed negative for the second consecutive week. Next week, headlines from Ukraine will continue to be closely watched, but the importance of Wednesday’s Federal Reserve meeting announcements followed by Fed Chair Jerome Powell’s press conference cannot be overstated as investors brace for a 25-basis point (0.25%) interest rate hike as well as insights into future Fed policy decisions.

Rents are Roaring Back

In the aftermath of the pandemic, apartment rental rates plummeted, particularly in major cities, but since bottoming around the end of 2020, rental prices have surged back in a major way. Perhaps no urban area has witnessed more pronounced swings than Manhattan though, as 2020 saw tenants leave in droves and caused inventory levels to surge around 200%. As a result, Manhattan rents fell to their lowest levels since 2013 and forced many landlords to resort to a variety of incentives as they desperately tried to fill vacancies. Almost two years later, however, and the days of Big Apple landlords offering on average 2.3 months of free rent (per data from Miller Samuel & brokerage Douglas Elliman Real Estate) are a distant thought as the median monthly price for a Manhattan apartment hit a record $3,630 in February, up 28% from a year prior (see chart below). Perhaps housing prices will indeed stall after rising a record 18.8% in 2021 (per Case Shiller HPI), but with rents also surging and inventory levels in many areas historically tight, it will be very interesting to monitor how these trends hold up in an unusually volatile economic backdrop.

Ian G. Browning, CFA
Managing Director, Investment Strategies | Shareholder