“Our message this year has been for investors to stay cyclical and overweight, industrial and retail malls—the sectors that typically outperform in a pro-cycling, rising interest rate market.” Those thoughts are according to a recent report from analyst firm BTIG.
“While hotels and industrial have outperformed YTD, we see evidence of rotation into more defensive sectors QTD as well as the apartments sector,” the firm said.
BTIG attributes that fact to both the Q2 2018 results as well as some external factors that have encouraged a more defensive posture. “We reiterate our view that the pro-cyclical sectors should outperform for the full year.”
Hotel and industrial sectors were the two sectors with the strongest results by any measure,” the firm points out. “But the apartment sector also performed well with all six of our covered names delivering ‘Beats’.”
In terms of negative surprises, three sectors, BTIG says that health care, strip centers and triple net had two companies that missed consensus estimates in the quarter. “However, there was a negative correlation this quarter between beat/miss and QTD total returns.”
Overall, the firm says, the hotel and industrial sectors are expected to outperform for the full year along with the mall sector.