Global Macro: Summers' Exit, Fundamentals Boost Markets

NEW YORK (TheStreet) -- News of the withdrawal of candidate Larry Summers to be the next Federal Reserve chairman helped boost markets on Monday.

Summers was assumed to be a hawk on monetary policy, and investors feared he would have driven interest rates higher sooner than expected. Liberal Democrats favor Janet Yellen, the current Fed vice chairman.

Markets moved higher on Monday also on fundamentals and Fed expectations. [Read: Summers Over]

The first chart below is of SPDR S&P Homebuilders (XHB). Homebuilder stocks have steeply fallen since May, when it was first announced that the Fed was thinking about reining in monetary stimulus. As uncertainty has arisen over the exact amount the Fed will cut from its monthly bond purchases, however, the market has bought back Treasuries, pushing rates down and leading to more demand for cyclical sectors such as homebuilders. A head-and-shoulders pattern has developed on the homebuilders' chart, but the threat of violence in Syria and less aggressive estimates over the amount of tapering have driven prices higher off of support levels. [Read: A Pair of Hot Dividend-Paying Stocks to Buy Now] Although the threat of higher mortgage rates still weighs on homebuilder stocks, the inability of prices to break down yet means tapering hasn't completely driven investors out of the sector. The next chart is of iShares MSCI Emerging Markets (EEM). Like homebuilder stocks, emerging-market equities are tied to U.S. interest rates and dollar strength. As investors have priced in a smaller-than-expected cut to current bond purchases, the dollar has weakened and funds have continued to flow into emerging economies. There is less fear over liquidity drying up, which means excess capital can be allocated toward riskier investments such as emerging-market equities. [Read: Can Gen Y Shake Its Bad Rap at Work?] Although the price of the index below looks slightly overbought, there is still room to the upside till prices reach overhead resistance. On the other hand, uncertainty over the exact amount to be cut from Fed purchases this Wednesday could mean a selloff until the Fed announcement. Either way, loose monetary policy looks bullish for both emerging-market and homebuilder stocks. At the time of publication the author had no position in any of the stocks mentioned. Follow @AndrewSachais This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Third Avenue Management Comments on Tanger Factory Outlet Centers

Tanger Factory Outlet Centers Tanger (SKT) is a U.S.-based real estate investment trust that owns andoperates43retailoutletcentersintheU.S. and Canada. Tanger has a leading position in outlet centers alongside Simon Property Group's Chelsea subsidiary (together they control 80% of the outlet malls in the U.S.). The outlet business has been extremely strong over the past few years, as rental rates and occupancy trends have remained strong due to the value orientation offered by the distribution channel. Tanger's centers have averaged97%occupancyover the past five years and rental rates have grown over 15% annually. Tanger has led the retail sector in internal and external growth, due to their low occupancy cost ratios and high demand from tenants. To put it in perspective, most luxury retailers state that the outlet distribution channel is among their most profitable, and have expressed an interest to continue to expand this channel. Tanger has one of the strongest balance sheets in the retail sector (approximately 30% net debt-to-assets). It is run by a conservative and incentivized management team and has strong development growth prospects, as it continues to capitalize on the trend of consumers and retailers shifting to the outlet channel.

From Third Avenue Management's semi-annual 2013 review.


Related links:Third Avenue Management