Markets haven't been doing very well to start the year, and
interest rates have been following stocks lower. In fact, benchmark
10-year government debt has fallen to a yield of 2.7%, a decline of
roughly 30 basis points since the start of 2014.
This dip in rates is a bit of a surprise due to the ongoing bond
taper from the Federal Reserve, but given the surging risks in
emerging markets, it does make some sense. After all, investors in
these markets are fleeing their risky securities for the safe haven
of U.S. T-bills, sending these rates lower and more than making up
for the lesser level of Fed purchases.
U.S. stocks have also been under pressure, as concerning data
points-along with the emerging markets issue- are sending many
stocks lower. However, thanks to the declining rates, we have seen
a few winners (read
7 ETFs to Buy in 2014
These winners largely come to us in the rate sensitive corners of
the market where companies benefit from declining rates. Many of
these firms were hurting in 2013 as rates nearly doubled, but with
declining worries over a rate spike in the near term, these
segments are starting to look a bit more promising once more.
Right now, these include some of the following segments and they
can easily be played with any of the following ETFs:
This safe sector has actually been outperforming the market so far
in 2014 as broad stock indexes have plunged. One popular way to
play this space in ETF form is via the
Utilities Select Sector SPDR Fund (
, a product that has added nearly 2% YTD, compared to a 3.5% loss
for SPY in the same time frame.
Concerns were really starting to build over the real estate market,
but with a strong home price appreciation reading and low rates,
these worries have been put on the backburner. One easy way to
target this space is with the
iShares Cohen & Steers REIT ETF (
, a product that pays a 3.5% 30 Day SEC yield, and has seen a gain
of 5.7% YTD (see
all the Real Estate ETFs here
With worries over real estate sliding, and rates dipping
lower, many are feeling more optimistic over homebuilders, and
especially so given some solid earnings as of late. Investors can
target this space with the
iShares US Home Construction ETF (
a product that gives direct exposure to the homebuilder space and
may be poised for more gains ahead.
For more on these ETFs and the rate-sensitive segments, make sure
to check out our short video on the subject below:
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ISHARS-C&S REIT (ICF): ETF Research Reports
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