Despite the meteoric rise in the Dow since the Presidential Election, one sector in the S&P 500 has been down considerably since Donald J. Trump was elected, and that sector has been the fledgling S&P Real Estate division. The S&P Real Estate Trust sector has been the market’s worst performer since it started two months ago. The division is down 10 percent since it’s first day of trading in September, while the S&P 500 itself has gained nearly 2 percent over that same time period. What is going on? And are the figures a true representation of where the U.S. real estate market is heading?
S&P Global’s Erin Gibbs is not surprised. Ms. Gibbs serves as a Research Analyst at S&P Global’s Market Intelligence, Research Division. She’s also an Equity Chief Investment Officer at Standard & Poor’s Investment Advisory Services LLC. In an email to CNBC, Gibbs stated:
“For the past 3 years, while we’ve been in this low interest environment, the Real Estate Investment Trust industry has hovered between 35 and 45 forward earnings, clearly commanding a premium for the dividends paid out and moving in the opposite direction of the yields.”
“Real estate has been a huge winner over the last seven and a half years, the total return is up something like 400 percent. But now it’s facing pretty stretched valuations, and more importantly, it’s probably fighting an unfriendly Federal Reserve.”
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