Earlier this year, I wrote a post suggesting that a rate cut might not happen anytime soon, possibly not even in 2024. However, as we approach September, it
seems the Fed might not have much choice anymore. The market is now betting on
a rate cut during the September meeting, and there's one sector that has been
hit hard by the high rates: Real Estate. However, the sector has shown
promising signs of strength lately. So, let's take a look.
Examine the base in the U.S. XLRE ETF, which has been forming for quite some
time. Below, I’ve added the main bond ETFs of different durations. All of them
are visibly moving in the same direction. While it's not guaranteed, any rate
cut could lead to a bid for these bonds and the real estate sector. I’ve also
included the U.S. interest rate at the bottom, providing a visual
representation of how the real estate market and U.S. bonds have evolved.
When we start comparing sectors, this emerging strength in real estate becomes
even clearer. Take a look at the relative rotation graph—the real estate
sector within the S&P 500 is on a tear, heading into leading territory.
That's something worth keeping an eye on...
Here are a few stocks plotted on the weekly chart, all within the real estate
sector. They are forming bases that could potentially propel these stocks
higher if breakouts occur, the sector starts performing well, and real estate
companies begin posting respectable earnings again.
So, what’s your take? Do you see real estate stocks performing well as we head
into the fourth quarter? Or is it a case of "buy the rumor, sell the
news"? Let us know!