As the market takes on more of a bearish mentality, investors look for alternative stocks to take shelter in. While cyclical sectors begin to underperform as the global economy flirts with a recessionary phase, defensive sectors start to look more attractive. While consumer staples often perform well during difficult times, one sector has all but faded from more investors minds since the financial crisis in 2008.
REIT's are generally good investments when other asset classes become more volatile. The real estate market isn't always correlated to the broader indexes and since 2008, many investors have avoided them based on a knee-jerk reaction that they will perform poorly when the market dips. The truth, though, is that certain REIT's are actually facing a bullish market right now.
While the Fed might have delayed its interest rate hike, it's a temporary issue that will eventually give way to a rising rate environment within the next year. This might not be positive news for prospective homeowners, but it is good news for companies that derive their income from rental prices. Continue reading "Is It Time To Consider This REIT For Your Portfolio?"
Last week the Federal Reserve once again announced they would not be raising interest rates. To many on Wall Street this was good news; cheap money would continue to be available, thus making it more affordable to borrow money to grow business's and spur economic activity.
But there is a downside to continued low interest rates which comes in the form of uncertainty about when rates will increase and how those increases will affect economic activity and mainly businesses that are directly affected by interest rates. When we look at who is most affected by rising rates, the finance sector is of course first to come to mind; banks and other lenders, but also the real-estate industry.
Whether it be individuals or businesses buying and selling homes or property rising interest means the overall cost of buying and owning that property increases, because of the higher interest rate the borrow will have to pay. Continue reading "Why You Should Stay Away From REIT ETF's For Just A Little Longer"
If you racked up big gains in the stock market last year, you have Ben Bernanke and his cohorts at the Federal Reserve to thank.
The SP 500's 29.6% gain in 2013 (32.4% when dividends are included), which was the best year since 1997, was largely based on comments made by the Fed in December 2012.
Back then, the economy was so weak that the Fed committed to keep the federal funds rate at historic lows in place until at least the middle of 2015, even later than many economists had assumed. Against such a favorable interest rate backdrop, stocks faced little resistance.
Indeed, throughout 2013, the likelihood of an imminent increase in the federal funds rate remained off the table. And three Fed governors even suggested in December that interest rates would remain untouched into 2016.
But in the early months of 2014, the Fed playbook is starting to look different. The recently released minutes from the past Fed meeting in late January show that some Fed governors are getting anxious. As The Wall Street Journal noted recently, Fed governors have begun discussing "the possibility of rate hikes in the near future." Continue reading "Rising Rates Are Coming -- Here's How To Prepare"