S&P Real Estate Sector Slumping

The S&P real estate grouping, which split off from the S&P 500, fell by 8% from the close of its first day of trading on Sept. 19 to Dec. 2. The broader S&P 500 climbed 2.5%, while financial shares gained 17% since the sector split.

There are a couple of reasons why real estate, which includes real estate investments trusts and management companies, decreased. The Federal Reserve indicated an interested rate increase, which would boost borrowing costs for real estate. Additionally, it’s anticipated that President-elect Donald Trump’s policies could led to inflation. This, in turn, could make dividend-paying stocks less attractive.

Still, analysts such as Kate Warne with Edward Jones don’t see REITs going away. She pointed out REITs are better-positioned to provide returns in a higher-interest-rate environment, as cash flow can be increased through increased rents.

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