The Real Estate Select Sector SPDR FundNYSE American: XLRE

The real estate sector has outperformed the S&P 500 by 8% since mid-April, driven by solid financial performance and rate-cut expectations. XLRE's portfolio structure, high dividends, low expense ratio, and robust liquidity make it a top investment option in the real estate sector. Initiating a position before a key event could help investors make healthy returns.

REITs are popular among investors, especially those seeking higher yields in the stock market. XLRE ETF holds all REITs in the S&P 500, presenting a mixed technical picture with potential for substantial gains post-Fed easing. Top 5 holdings in XLRE are profitable but overvalued, while the REIT sector offers growth potential in various sub-sectors.

REITs still offer buying opportunities amidst market volatility and uncertainty surrounding interest rate cuts. Realty Income and VICI Properties are undervalued REITs with strong upside potential and high-quality portfolios. Both REITs offer yields near 6% and strong cash flows, making them attractive long-term investments in a changing market.

On today's edition of Good Buy or Goodbye Interactive Brokers Chief Strategist Steve Sosnick breaks down two interest rate-sensitive sectors in a higher-for-longer economic backdrop. Sosnick sees the Real Estate Select Sector (XLRE) ETF as a good buy, explaining that "it's interest rate sensitive on the way in and the way out.

Real estate lags other asset classes as elevated rates continue to drag on performance. Federal Reserve indicates there is no rush to cut interest rates, creating uncertainty for real estate investors. XLRE is a large real estate ETF with diversified exposure to the sector, focusing on quality operators and excluding mortgage REITs.

REITs should perform well in 2024 after a challenging 2023 as the Fed is set to cut rates this year. The Real Estate Select Sector SPDR Fund ETF is a way to gain exposure to the REIT sector. XLRE has a small portfolio of 34 stocks and performs well compared to peers.

Inflation readings have continued to moderate, with October's reading CPI coming in flat. The stock market and the bond market reacted with optimism about the future.

REITs have performed well since November 1 due to the Federal Reserve not raising rates and hinting at a further pause, but this could change. In these conditions, historical performance shows that the Real Estate Select Sector SPDR Fund ETF is better than the Vanguard Real Estate Index Fund ETF. XLRE has outperformed VNQ in both low and high-interest rate environments and has higher exposure to specialized REITs.

The October jobs report showed weaker-than-expected nonfarm payrolls and private payrolls, with a rise in the unemployment rate. Average hourly earnings growth continues to decline, reaching a new cycle low. US 10yr yield falls after dovish data, impacting the real estate sector and making the XLRE ETF an attractive buy.