If there’s one thing income investors love, it’s a high-yielding dividend stock.
But too often the high yield comes with risky metrics like declining revenue and earnings, which could force a company to cut its dividend to ensure it has the available funds to pay its shareholders.
The prevailing wisdom on Wall Street is that recessions follow massive interest rate hikes, as high-interest rates slow down sales of real estate, automobiles and credit card spending on nonessential retail goods.
Investors who bought stocks during the COVID-19 market crash in 2020 have generally experienced some big gains in the past two and a half years. But there was no question some big-name stocks performed better than others since the pandemic bottom.
Real estate was the second-worst-performing sector after technology in 2022, primarily because of multiple rate hikes. The Federal Reserve raised the benchmark federal funds rate seven times last year to the highest level in 15 years to mitigate inflationary pressures. The S&P United States REIT index plunged 27% in 2022.
Real estate investment trusts (REITs) were deeply affected by the Federal Reserve’s actions in 2022, which led to higher interest rates. Even as investors anticipated an eventual lowering later in 2023 or at least by 2024, sellers remained in control of REIT shares all year.
Real estate was one of the worst-performing sectors in 2022, as rising interest rates and low demand pummeled both residential and commercial real estate investment trusts (REITs). The Real Estate Select Sector SPDR ETF has declined by 27.8% year to date. In comparison, the benchmark S&P 500 index is down only 19.7% in 2022.
Evaluating relative strength is important when determining which stocks to buy. Relative strength shows which sectors or individual issues are outperforming market peers.
Real estate investment trusts (REITs) continue to weaken, with a number of them hitting new 12-month lows.
These reflect the negative effects on the market of the higher interest rates that the Federal Reserve is pursuing. Other factors are at work, but this is a rate-sensitive group and they’re feeling the pain.