How Equity REITs Have Fared Since 7/8/16

Bob Carey
Chief Market Strategist

Bio
X • LinkedIn

Blog Home

Send Us Your Comments And Questions

RSS Feed

How Equity REITs Have Fared Since 7/8/16

Posted Under: Sectors

View from the Observation Deck

The yield on the benchmark 10-year Treasury note (T-note) closed at an all-time low of 1.36% on 7/8/16, according to data from Bloomberg.
From 7/8/16-5/21/19, the yield on the 10-year T-note rose from 1.36% to 2.43%, or an increase of 107 basis points. In the period, however, the highest closing yield was 3.24% on 11/8/18, or 188 basis points off the all-time low.
When bond yields rise, income-oriented investors may seek opportunities that will not only generate current income, but also have the potential to better preserve capital. Equity REITs have historically been one of those options.
The basic premise is that while REIT prices have tended to decline as yields begin their ascent, they often recover over time provided the cause of the increase in rates is stronger economic activity.
That is exactly what transpired in the period depicted in the chart. Click here for some additional perspective on the relationship between Equity REITs and rising rates.
From 7/8/16-5/21/19, the S&P 500 Real Estate Index posted a cumulative total return of 18.47%, compared to -0.66% for the ICE BofAML 7-10 Year U.S. Treasury Index, according to Bloomberg. Equity REITs delivered as advertised.
Investors funneled an estimated net $2.71 billion into U.S.-based Real Estate mutual funds and exchange-traded funds over the first four months of 2019, according to Morningstar.
Moving forward, the combination of a strong U.S. economy and the Federal Reserve signaling it does not foresee the need for any further rate hikes in 2019 suggests that the climate for Equity REITs should remain attractive for investors, in our opinion.

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Real Estate Index is comprised of stocks included in the S&P 500 Index that are classified as members of the real estate sector. The ICE BofAML 7-10 Year U.S. Treasury Index tracks the performance of U.S. dollar denominated sovereign debt publicly issued by the U.S. government with a remaining term to maturity between 7 to 10 years.

Download a PDF of this post, please click here.

Posted on Tuesday, May 28, 2019 @ 3:42 PM • Post Link

Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.

Most Current Posts

<<< Newer Posts • Older Posts >>>

Search Posts

MARKET ANALYSIS

Market Commentary and Analysis
•	Market Commentary Video
•	Monthly Talking Points
•	Quarterly Newsletter
•	Market Observations

Subscribe To Receive Email

PREVIOUS POSTS
•	A Snapshot Of The Rally In The U.S. Dollar
•	Tracking The Retail Investor’s Appetite For High Yield Corporate Bonds
•	A Snapshot Of Bond Valuations
•	A Snapshot of Moving Averages
•	Interest is 3x More Expensive than Earnings
•	U.S. Major Stock Indices Have Outperformed Their Foreign Counterparts Since Trump Was Elected
•	Top-Performing S&P 500 Index Subsectors in 2019
•	A 10-Year Snapshot Of Sector Mutual Fund Flows From Retail Investors
•	How Bonds Have Fared Since 7/8/16
•	Consider The Potential Opportunity Costs Before You Sell In May And Go Away!