Next, consider the chart of 1yr performance of the same sectors:
The yellow line shows the performance of the index tracked by IEF. From November of 2015 through June of 2016, rates fell, IEF’s index rose, and utilities and real estate outperformed while financials lagged. As rates bottomed near the end of June, performance reversed. Financials have come roaring back, especially in the aftermath of the Trump victory, while utilities and real estate have underperformed.
While the rate movements of 2017 are unknown today, it’s quite possible the performance of these three sectors will be tied to interest rate trends. Investors considering an overweight or underweight should consider the implications that interest rates will have on performance.
RWR, XLU, XLF and IEF has been, may be and/or are currently held in several TOPS portfolios.
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Source: Bloomberg for historic price and return references. TOPS® is a registered trademark of ValMark Advisers, Inc.