The real estate investment trust and utilities sectors were the biggest losers of the S&P 500’s 11 key sectors, and their weakness was unanimous, as a big jump in Treasury yields helped lure investors away from the high-yielding sector. The SPDR Real Estate Select Sector ETF XLRE, -1.94% slumped 2.1% with all 32 of its equity components losing ground and SPDR Utilities Select Sector ETF XLE, +1.54% shed 2.0% with all 28 components declining. REITs are utilities are often seen as bond proxies, given their high yields, while the S&P 500 SPX, -0.12% eased 0.1%. The REIT ETF’s dividend yield was 3.38% and the utilities ETF’s yield was 3.11%, compared with the implied yield for the S&P 500 of 1.98%, according to FactSet.
What we have witness over the last 12 months is the Smart Money rotating from discretionary sectors to defensive sectors.
As the article implies, REITs and Utiliities act like bonds because of their consistently pay out dividends. And despite the recent declines, these two sectors should continue to outperform because according to MFS Investments, global bonds returned 12 percent in 2008 and bonds outperformed equities in 2000, 2001 and 2002 as well.
The level to pay attention to on XLRE is the weekly demand at $34.50.
And the level to pay attention to on XLU is the weekly demand at $57.
This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.