When new trends emerge in the markets it is our job as investors to listen to what they are saying, whether it be short-term or longer-term. One of those emerging trends comes from the interest rate world. If you haven’t noticed, rates have crept higher in February – I took a closer look at the rise of the 10 Year Treasury Yield earlier this week and discussed why it may effect your portfolio.
As many of you know, yield trends have an effect on interest rate sensitive ETFs like Real Estate (IYR), 20+ Year Treasury Bond (TLT), and Utilities (XLU). And with interest rates around the world spending much of 2014 and early 2015 declining, interest rate sensitive ETFs like IYR, TLT, and XLU had been outperforming… until recently.
Check out the chart below. This is what an uptick in interest rates can do to interest rate sensitive sectors:
In short, higher yields often adversely impact Real Estate, while bringing lower Bond prices and offering competition for solid yielders like Utilities.
Notice that each of these ETFs respective short-term uptrends have been broken to the downside. This means that investors should use caution around these sectors over the near-term until conditions change and / or they find support and re-exert their broader uptrends.
Thanks for reading.
Follow Chris on Twitter: @KimbleCharting
Author may have positions in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
