BTIG analyst Jonathan Krinsky said REITs appear positioned for a technical breakout after lagging other S&P 500 sectors since the end of 2021. The sector registered a gain in excess of 1.5% today while high-momentum stocks weakened across major indices.
REITs have fallen 12.5% since the close of 2021, making them the only sector within the S&P 500 to remain below its end-2021 level. According to BTIG, a decisive move above the $98 to $100 range for the Vanguard Real Estate ETF (VNQ) would indicate the ETF could retest 2021 highs near $117.
The firm argues the ongoing unwind of momentum in the market generally benefits REITs, which BTIG classifies among the lowest-momentum names at present. Krinsky called out constructive technical patterns for several real estate names, naming Extra Space Storage, NNN REIT, Inventrust, and Regency Centers as examples.
On the equity side, Krinsky expects the Nasdaq 100 to probe its 50-day moving average, a move that would entail roughly 4.5% more downside for QQQ based on his analysis. The analyst also flagged a possible 15% decline for the semiconductor-focused SOXX ETF to its 50-day moving average.
Market action today was consistent with BTIG's historical analysis: the Nasdaq 100 broke Friday's lows, and BTIG notes a 90% historical probability of such a break when the index falls 4% or more on a Friday.
BTIG retains buy ratings on two REITs mentioned by Krinsky. Inventrust carries a buy rating with a $32 price target, and Regency Centers is covered with a buy rating and a $79 price target.
Intraday moves cited alongside BTIG's commentary included NDX -2.46%, US500 -1.21%, QQQ -2.39%, REG +2.41%, EXR +2.22%, NNN +2.27%, VNQ +2.05%, SOXX -4.73%, and IVT +0.83%.
Clear summary
BTIG's Jonathan Krinsky says REITs, after underperforming since 2021, may be ready to rebound if VNQ clears $98-100. The firm sees momentum dynamics favoring low-momentum REITs while warning of further downside for the Nasdaq 100 and SOXX to their 50-day moving averages. BTIG keeps buy ratings on Inventrust and Regency Centers.
Key points
- REIT sector rose more than 1.5% today after a prolonged period of underperformance - impacts real estate and REIT sector participants.
- BTIG identifies a VNQ breakout range of $98-100 as a technical trigger to challenge 2021 highs near $117 - relevant for ETF and real estate investors.
- Downside pressure is expected for major growth and semiconductor benchmarks, with QQQ and SOXX singled out to test 50-day moving averages - impacts technology and semiconductor sectors.
Risks and uncertainties
- The VNQ breakout is conditional - failure to clear $98-100 would leave the ETF short of the threshold BTIG cites for challenging $117, affecting real estate positioning.
- BTIG projects roughly 4.5% additional downside for QQQ to reach its 50-day moving average; such a move would further pressure tech-heavy indices.
- SOXX could fall as much as 15% to its 50-day moving average per BTIG's scenario, posing material downside risk for the semiconductor segment.