Last Friday’s opening ceremony marked the official start to the 2016 Summer Olympics in Rio. That day also marked another important milestone here in the U.S. – record market highs. Despite the market volatility experienced in the first half of this year, the S&P 500 and tech heavy Nasdaq Composite Index both reached new record highs as of last Friday’s close. One particular area of the market has received a gold medal for performance this year, but isn’t officially considered a sector of the market, yet….
On August 31, the S&P 500 will add Real Estate to its current list of 10 sectors into which it is divided. Real estate is currently considered an industry inside the financial sector. After the change, real estate will comprise about 3% of the overall index as a stand-alone sector – about the same weight as the utilities and materials sectors. Demand for real estate investment trusts (REITS) and other income producing assets has been strong this year as low interest rates have pushed income oriented investors into bond surrogates. This change in market sector allocation could extend this winning streak if actively managed mutual funds that are underweight in this sector seek to increase exposure in their portfolios.
Real estate has been a long-standing holding within our managed accounts, and we believe the current low-growth and low-yield environment will support demand for this new sector of the market.
One last note that relates to real estate, on Thursday, August 25th, Security National Bank will be hosting the annual Farmland Values and Agricultural Economics event featuring speakers Michael D. Duffy, Ph.D, Rex Wilcox, and Michelle Rook. Seating can be reserved by calling 712-277-6586.
If you have any questions on the above article, contact us below.
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