Real Estate's Favorable Period is Winding Down

I am not very good at “predicting” things. But I am reasonably good at “observing” things. And one thing I have observed is that real estate stocks tend to perform better during late winter through mid-summer and tend to perform less well during late summer into early winter.

Let’s take a closer look.

Favorable Period

Figure 1 below displays the growth of $1,000 invested in ticker FRESX (Fidelity Select Real Estate) only during the months of March through July since fund inception in 1986. Like most things related to the financial markets it is by no means perfect. At the same time, it is still pretty darn good – at least in terms of consistency.

Figure 1 – Growth of $1,000 invested in ticker FRESX ONLY suring May through July (1987-2019)

Assuming FRESX does not collapse before the end of July, 2019 will mark the 28^th UP March through July period for FRESX in the past 33 years (84.8% success).

Less Favorable Period

Figure 2 below displays the growth of $1,000 invested in ticker FRESX (Fidelity Select Real Estate) only during the months of August through November since fund inception in 1986. We cannot designate this period as “bearish” since there are obviously many years when this period shows a gain. But that is not the point. The point is simply that the gains are much less consistent than during the period covered in Figure 2.Figure 2 – Growth of $1,000 invested in ticker FRESX ONLY during August through November (1987-2018)

Summary

So how will real estate stocks perform between Aug 1 and Nov 30? It beats me. They may do just fine.

But the bigger picture lesson is that putting the odds in your favor can pay off big in the long run.

Jay Kaeppel

Disclaimer: The data presented herein were obtained from various third-party sources. While I believe the data to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information. The information, opinions and ideas expressed herein are for informational and educational purposes only and do not constitute and should not be construed as investment advice, an advertisement or offering of investment advisory services, or an offer to sell or a solicitation to buy any security.