Does This ETF Represent Good Value, or Will It Struggle, As Interest Rates Rise?

Rising interest rates affect a wide range of industries in a broad and systematic way. For the majority of economic sectors that have relied on ultra-low interest rates for the better part of the past decade, a rising interest rate environment has resulted in pause among many investors choosing to re-balance their portfolios away from those sectors which may continue to underperform in the near term to those with continued momentum.

One such sector which would certainly fall into the category of “oversold” or in which investors appear to be overly pessimistic about the future of this economic driver is the construction/home building sector.

Construction of new homes or the renovation of older homes is often looked to as a bellwether of how well the economy is performing, as well as an indicator of expectations as to how well consumers expect the economy to perform in the medium to long term.

With sentiment growing increasingly bearish of late due to a number of factors, including relatively high indebtedness levels which have increased to levels not seen since prior to the most recent housing crisis, it makes sense that investment within this sector has begun to slow.

For those bearish on the overall economy but bullish on the long term value of real estate investments as a percentage of a well balanced portfolio, investing in ETFs such as the SPDR S&P Homebuilders ETF is one way to gain exposure to this sector which is expected to perform well over the long haul.


Invest wisely, my friends.