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.
Ryan Gilmer, CFA, is VP Investment Management at TOPS/ValMark Advisers, a participant in the ETF Strategist Channel.
Important Disclosure
RWR, XLU, XLF and IEF has been, may be and/or are currently held in several TOPS portfolios.
ValMark Advisers, Inc. (“ValMark”) is a federally registered investment adviser located in Akron, Ohio. ValMark and its representatives are in compliance with the current registration and notice filing requirements imposed upon federally covered investment advisers by those states in which ValMark maintains clients. For registration or additional information about ValMark, including its services and fees, a copy of our Form ADV is available upon request by contacting ValMark at 1-800-765-5201.
This article provides commentary on current economic and market conditions and is not directly relevant to any particular client account. The information contained herein should not be construed as personalized investment advice or recommendations to buy or sell any security. There can be no assurance that the views and opinions expressed in this article will come to pass. Investing involves the risk of loss, including the loss of principal.
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Source: Bloomberg for historic price and return references. TOPS® is a registered trademark of ValMark Advisers, Inc.