The S&P 500's real estate sector has been outpacing the broader market throughout the year. It's the second best performing sector in the index, in between technology and communications companies. That risky and safe-haven sectors could simultaneously lead the market might seem contradictory, but investors have needed a hedge as the decade-long bull market appears threatened by a global economic slowdown.
"It's like a barbell approach," said
Stovall said real estate stocks are holding up well because investors feel they are not overvalued.
Real estate investment trusts, including
Investors have been hedging their bets throughout the year in other ways. Bond prices have been rising, which has pushed the yield on the 10-year
The sharp drop in bond yields, which has happened on a global scale, is also likely behind the rise of real estate stocks with their reliable dividends.
"The big move down in yields globally created an appetite for more defensive high-yield holdings," said
Increased optimism for corporate earnings growth in 2020 could put more emphasis on high-growth holdings like technology and communications stocks. Investors are closely watching company statements about capital spending, which has been slumping amid anxiety over trade.
Stovall said that the investors have historically shifted into more aggressive holdings starting in November. That could result in a stunted performance for more defensive stocks, including real estate companies.
"To everything there is a season, and the same goes for the stock market," he said.