This month’s video takes an in-depth look at the closed-end fund marketplace. Charts include both diversified CEF indexes and single fund names. Overall the trend remains solid, however we are starting to see stretched premiums and tight discounts across the entire spectrum. Risk is high and caution should be warranted at this stage of the cycle. Video recorded after the market close on February 8, 2017.
ETF investors are likely measuring the resilience and relative performance of their portfolios during the latest 6-month jump in interest rates. Bond funds are the obvious areas of concern in terms of volatility. However, many stock and equity-income asset classes maintain a high sensitivity to Treasury yield fluctuations as well.
REITs certainly fall into this category and are one of the few sectors of the market currently trading well off their highs. As I wrote in September, inflection points in interest rates typically signal a change of trend for these assets. Read more
Real estate stocks have taken a beating in recent months as rising interest rates derail the momentum of this beloved income sector. Yet despite the dip in traditional housing and commercial REITs, one high yield segment of the market is still seeing surging prices.
Mortgage REITs (or mREITs) have largely ignored the trend in Treasury bonds and instead focused on the continued strength in overall credit conditions. This has translated into new all-time highs for the small group of exchange-traded funds that track these investments. Read more
Real Estate Investment Trusts, or REITs, have become a prominent segment of the stock market over the last several decades. These investments have become so popular that the Global Industry Classification Standard (GICS) just recently split them off from the financial sector to form its own standalone category. REITs are now considered a key player within the S&P 500 Index and other major U.S. benchmarks. Read more
The allure of high yields is something that income investors are always tempted to chase. When you couple an outsized dividend payout with an explosion of momentum, the attraction can become even further exacerbated. This is exactly what happened earlier this month when Jeffrey Gundlach offered a recommendation for investors to purchase the iShares Mortgage Real Estate Capped ETF (REM) and simultaneously short the Utility Select Sector SPDR (XLU).
Since that call, REM has only experienced a single minimal down day among nine trading sessions and daily volume has exploded in kind. The chart below shows how much Gundlach’s recommendations carry weight throughout the income-focused investment community.