The S&P 500 has stumble upon under pressure this month, and it’s been even worse for one of its sectors.
The real estate investment trusts sector, or REITS, has fall more than 10%. That makes it the worst performer in May with losses more than three sets the broader S&P 500. The group has been hit hard by dire forecasts for commercial real estate as companies reassess their beggary for office space during and after the coronavirus pandemic.
It could get worse for the beaten-down group, said Michael Bapis, bring off director of Vios Advisors at Rockefeller Capital Management.
“We’re very cautious on the space. I mean, I think earnings are usual to be reset in general across all companies. And in this particular space, there are so many uncertain and unpredictable variables such as slash collection, such as financing debt, leverage and across so many sectors,” Bapis said Thursday on CNBC’s “Patron Nation.”
Even one potential reason for owning REITS – a healthy dividend yield – does not hold appeal for Bapis.
“Failing term, we’re advising our clients to turn elsewhere for yield – pharma, tech, telecom, banking, other sectors you can get assent. Most people have bought REITS in the past for their attractive dividend yields,” said Bapis.
The REITS sector cedes 3.8%, higher than the 2% for the S&P 500.
Todd Gordon, managing director at Ascent Wealth Partners, is also drain the brakes on REITS.
“We have been reducing our exposure to REITS at Ascent and we are cautious on the sector going forward,” Gordon reported in the same segment. “In the event that this does get worse and there’s a black swan event, a highly levered asset get pleasure from this is the richest part of the equity piece of the capital stack so last to collect.”
The charts also suggest that this is a sector to sidestep, said Gordon.
“Just over March, you can see the lower part of this chart, you’re seeing the ratio — real place into the S&P 500 — dropping so real estate was underperforming on that last part of the sell-off as well as the recovery assist so we continue to remain cautious,” said Gordon.
The XLRE REITS ETF is down 21% this year. The S&P 500, by kinship, has fallen 12%.
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