Currently, the less exciting segments of the market are experiencing significant growth.

In times of market instability, sometimes stability can be beneficial. Over the past month, the S&P 500’s real estate and utilities sectors have seen gains of 7.4% and 6.7%, respectively, while the broader S&P 500 index has fallen by more than 6%. Even this week, these sectors have outperformed, each dropping just over 1% compared to the S&P 500’s nearly 3% decline. These figures don’t even account for potential dividends from these traditionally stable sectors. This trend is partly due to growing expectations of Federal Reserve interest rate cuts amid concerns about the U.S. economy. Additionally, a shift from this year’s top performers to next year’s underperformers has benefited these sectors. Utility companies, which often carry significant debt, benefit from lower interest rates as it eases their financial burden. For the real estate sector, lower mortgage rates driven by easier monetary policy increase housing investment demand. Furthermore, lower bond yields make the dividends from these sectors more appealing to investors.

Rob Ginsberg, a chart strategist at Wolfe Research, highlighted that the utilities sector is not only withstanding recent market volatility but is also showing signs of growth. He pointed out that the Utilities Select Sector SPDR Fund (XLU), which tracks the S&P 500 utilities sector, surpassed the $73 mark for the first time in nearly two years this week. Ginsberg believes the sector will continue to perform well as investors seek value and defensive stocks.

In the real estate sector, prices reached their highest closing level earlier this month since February 2023. BMO Capital Markets suggests that one way to invest in this sector is through Vornado Realty stock, which they have upgraded to outperform from market perform. They raised their price target to $40 from $29, indicating a potential upside of over 33% from Wednesday’s close. Analyst John Kim noted that despite Vornado Realty’s strong NYC office and retail fundamentals and high-quality portfolio, it has been underappreciated. However, it is now demonstrating high leasing volumes with attractive rents, selling properties at premium valuations, and successfully executing major redevelopments in PENN Plaza.