- Stop listening to “THEY“. “THEY” do NOT know the future
- Stay diversified
- Buy the sector that “THEY” are hating on. That sector will turn around, eventually
- Make an investment plan. Stick to it. And don’t listen to “THEY“
- This too shall pass…
Question: Do REITs go down in value when interest rates go up?
Question: Do Utilities go down in value when interest rates go up?
Question: Do Consumer Stapes go down in value when interest rates go up?
Question: Do Financials go up in value when interest rates go up?
Question: Are interest rates going up slowly and incrementally, or are they skyrocketing?
You may want to answer these questions for yourself, before listening to “THEY“.
Reuters, February 2018 – “Real estate, utilities and other interest rate sensitive sectors are not a good place to be.”
Barron’s June 2018 – “Utilities and Real Estate Get Downgraded as the Fed Raises Rates”
ETF.com February 2018 – “Considered two of the most interest-rate-sensitive sectors, utilities and real estate have struggled as the benchmark U.S. 10-year Treasury bond yield has climbed almost half a percentage point from 2.41% at the start of 2018. Both sectors were popular during the past few years as interest rates fell to ever-lower levels, prompting income investors to stretch for yield. Now that rates are rising, some of those same investors are selling first and asking questions later.”
InvestorPlace.com June 2018 – “Some asset classes and sectors are inversely correlated to rising interest rates. At the sector level, that includes groups with bond-like traits, such as real estate, telecommunications and utilities or other assets known for income-generating potential.”
Benzinga May 2018 – “OUSM now has no exposure to real estate stocks and its combined weight to the rate-sensitive consumer staples, telecommunications and utilities sectors is just under 12 percent.”
Barron’s January 2018 – “Don’t Chase High Utility Yields”
Seeking Alpha April 2018 – “Banks benefit from higher interest rates since it increases the yield on their massive cash holdings.”
Reuters January 2018 – “The jump in U.S. Treasury yields to more than three-year highs is pushing fund managers to sell interest-rate sensitive utility and real estate stocks, but does not yet threaten to derail the nine year-long bull market in U.S. equities or slow down the broader economy.”
Seeking Alpha February 2018 – “The companies and sectors that are very sensitive to rising interest rates like financials are owned as the largest portion of SPLV. With a 23% average holding in financials, SPLV will be in the driver seat to take advantage of rising rates. With the 10-year closing in at 3%, financials should benefit long-term from higher margins. You can see that the SPLV is made up of sectors that will benefit from rising rates just as well as those that aren’t. Investors are focused currently more on rate sensitive sectors that tend to under-perform like utilities and consumer defensive, that they forget about the sectors that do benefit from rising rates.”
NASDAQ February 2018 – “Short These Sector ETFs on Rising Rate Concerns”. “In such a situation, high-dividend-paying sectors such as utilities and real estate would be the worst hit given their higher sensitivity to rising interest rates. In fact, rising bond yields have started taking away some sheen from these stocks, putting them under severe pressure for the months to come as well.”Â
Seeking Alpha May 2018 – “Dividend growth investors which rely upon the generous yields offered by such sectors as utilities or real estate investment trusts might want to look into the financial sector as a way to offset further potential capital losses suffered by interest-rate sensitive holdings. If interest rates rise meaningfully, the financial sector is likely to experience significant profit growth due within two of its constituent sectors — banking and insurance.”
“THEY” didn’t know then, and “THEY” don’t know now. Nobody does!
Stay diversified friends
Respectfully yours, Micah McDonald, aka the Deep Value ETF Accumulator
