REITs have been one of the best performing sectors in the equity markets over the past couple of years, setting new all-time highs this month (on a total return basis).
I’m starting to worry, however, about the growing vulnerability in both commercial and residential real estate. At the same time, I believe investors have been broadly reaching for yield in the sector pushing them into euphoric territory.
Technically, the chart of the REIT ETF is also putting in some momentum divergences amid a potential major reversal after nearly achieving its Fibonacci extension target. All in all, I think it’s prudent to eliminate the small (5% allocation) position here in the tactical portfolio.