Could housing be your best bet for the rest of the year?
Of the four industry groups in the S&P 500 financial sector, only one is up on the year: real estate. Building products, construction materials and specialty home-improvement retailers have also performed admirably.
Low rates provided by bonds have increased the relative attractiveness of high-yielding real estate stocks, and have made it easier for individuals and businesses to finance real estate purchases. Additionally, housing stocks are more levered to the state of the consumer than many financials, meaning they follow consumer discretionary stocks higher.
For Todd Gordon of TradingAnalysis.com, these factors, plus the potential diversification offered by housing stocks, make them an ideal place to invest in right now.
"Housing is, I think, a wonderfully well-positioned sector," Gordon said. "Interest rates remain low, and I think that is positive for housing. And with a stock market that is at such elevated levels, housing becomes a nice defense mechanism if, in fact, stocks want to move down—because real estate can move counter-cyclical to the stock market."
Additionally, Gordon derives additional encouragement from the chart of the iShares US Home Construction ETF (ITB).
"We've broken about a multiyear channel consolidation at $26.50," he said. And since that old resistance level is now support, "that was your launching pad," he said.
Gordon has personally taken a bullish position by buying a call spread on the ITB.