Real Estate “Sector” to be Added to the S&P 500
As we come to a close on August a little known new sector is being added to the S&P 500, “Real Estate”. The S&P 500 (the popular stock market index) has long had 10 categories to which it was divided. Portfolio managers including yours truly, have always used these measures as a benchmark to manage portfolios against. However, come August 31st, Real Estate will be the 11th sector and according to Raymond James research will make up as much as 3.3% of the index.
Doesn’t sound like much however a recent JP Morgan report estimated that $100 Billion could come into this market. Standard & Poor’s shows Real Estate itself as a sector has been on a tear from the start of 2014 returning 30% in 2014, 4.8% in 2015 and 11.4% through the end of the 2nd quarter 2016. I’ve had exposure to this sector for some time, however Im starting to grow very cautious on this space mainly due to the excitement around the sector being introduced, and the relationship between rates rising and 10-year treasury. See a chart below that grabbed my attention.
Any opinions are those of Mick Graham and not necessarily those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. Inclusion of these indexes is for illustrative purposes only. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance.
Individual investor's results will vary. Past performance does not guarantee future results. Holding stocks for the long-term does not insure a profitable outcome. Investing in stocks always involves risk, including the possibility of losing one's entire investment.
