The Real Estate Select Sector ETF (XLRE) is the worst performing sector ETF in 2024, up about 3.5% right now. Seven sector ETFs have gained more than 10% this year, and the S & P 500 is up 15%, itself. For this reason, XLRE hasn’t gotten a lot of attention. More recently, however, XLRE has begun to come alive and the charts indicate more gains are ahead. The ETF is net-flat going all the way back to September ’22. Needless to say, hundreds of stocks, ETFs and indices have done considerably better over the last two years. But, it has been the best sector ETF in July, with a monthly gain of nearly 8%. XLRE has done this by being one of the most consistent of the SPDR ETFs over the last few weeks: Through July 30, the ETF has been higher 14/21 days. (Check out Frank’s exclusive PRO Talks on his methods here .) The comeback has been extremely important from a technical analysis perspective, too. XLRE now is trying to break out of two bullish formations, both of which are displayed on this weekly chart. Should the ETF continue to trade above the breakout zone near $41, its upside targets of $50 and $45 will remain in place. As we can see, both breakouts have just happened, as XLRE had been flirting with (and failing at) the 40-41 area during the middle of the month before this recent push higher. With the inflation data gradually improving of late and the Federal Reserve warming up to cutting rates sooner rather than later, the 10-Year yield has declined. In theory, falling rates should help real estate, and this is exactly what has been happening. This chart shows the 10-Year Yield (green) and XLRE (red). The vertical lines depict the two major tops in rates since 2023. Not by coincidence, XLRE simultaneously logged important trading lows and extended higher for months each time, including recently. After such a strong run the last few months, the question is whether XLRE has much left in the tank going forward. The answer is a resounding yes… if the breakout in the SPDR S & P Homebuilders ETF (XHB) to new highs is any indication. Up until late-2023, XLRE and XHB were pretty tightly correlated. However, that markedly changed as 2024 began. XHB continued to advance, while XLRE declined through mid-April. With interest rates having rolled over since then, both XHB and XLRE have benefited. And if rates are going to keep declining, then XLRE will have a strong tailwind to potentially catch up to XHB once again. -Frank Cappelleri Founder: https://cappthesis.com DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
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