The real estate and utilities sectors are hovering at record levels thanks to the current low interest rate environment.
Uncertainty fueled by the U.S.-China trade war and global growth slowing has caused interest rates to tumble. The yield on thefell to its lowest level in three years on Tuesday after a report on the U.S. manufacturing sector showed that the industry contracted in August.
The collapse in bond yields has set the stage for standout performance of the real estate and utilities sectors due to their high dividend payment to shareholders. Investors pile into utilities and real estate in times of uncertainty because of their higher dividends and steady cash flow. Utilities are generally more stable stocks, as demand for electricity and gas is a steady consumer and business need.
When yields drop, mortgage rates also go down and that means more people will buy real estate or refinance their mortgages. Affordability of real estate boosts activity in the market and lifts real estate stocks. Warehouse specific real-estate companies are also strong performers this year thanks to the e-commerce boom, which is also lifting the real estate sector.
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