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For Your Money is brought to you by Nelson Corp Wealth Management.
Brandy Auterson-Hurst:
It’s now time for, For Your Money. We’re joined by Nate Kreinbrink, financial advisor at Nelson Corp Wealth Management. Welcome back Nate.
Nate Kreinbrink:
Thanks again for having me.
Brandy Auterson-Hurst:
All right. So the stock market has performed well to start the year, but not all sectors are participating, so share your thoughts on that.
Nate Kreinbrink:
Yeah, so following the interest rate driven decline that we saw in most sectors in 2022, we’re starting to see some areas show some signs of recovery. So the technology and growth stocks have kind of led this rally and are primarily responsible for driving the positive numbers that we’ve seen in major indexes. One area that has kind of continued to struggle though has been real estate, and this is even following last year’s losses. We’ve got a chart here that kind of dives into this a little bit more, and what we’re showing here is the worst performing subcategory in the real estate sector, and that’s commercial office buildings.
So the blue line on this chart represents the S&P 1500 REIT stock index. Okay. And you can see current levels are approaching levels that we have not seen since the great financial crisis. Now, there’s a couple areas that are kind of contributing to this, and since the pandemic, we have not seen occupancy rates exceed that 50% range. Now again, we may not have seen this as much in our area, but in bigger markets this has continued to be a problem. And secondly, another factor has been interest rates. And as these places continue to refinance, they’re having to do so at higher interest rates and lower occupancy levels.
Brandy Auterson-Hurst:
All right, so how can viewers use this information when it comes to their investment decisions?
Nate Kreinbrink:
So I think it’s important to remember that sometimes things are priced low for a reason, and although some may look at that price chart and view that as an opportunity, given our current dynamics, I think it’s safe to say that this space may have a bumpy road going forward.