The upside momentum in the US stock market so far this year continues to be led by rallies in communications services and energy shares, based on a set of ETFs through Monday’s close (May 6). Both sectors are outperforming the broad market and their counterparts.

Communication Services Select Sector SPDR Fund (XLC) and Energy Select Sector SPDR Fund (XLE) are tied for first place in 2024’s performance run. Each fund is posting a 12.2% year-to-date return. The gains reflect moderate premiums over the broad market’s 9.0% increase this year, based on SPDR S&P 500 ETF (SPY).

All but one of the primary equity sectors are sitting on year-to-gain gains — increases either match the broad market’s rally via SPY or fall short. The downside outlier for sector performance: real estate, which continues to post a steep year-to-date loss.

Property shares, which are prized for their relatively high payouts, have been hurt by the rise in Treasury yields. The stronger competition in risk-free government bonds is considered a factor in the slide for real estate investment trusts.

Real Estate Select Sector SPDR (XLRE), which has fallen 6.9% year to date, currently yields 3.69% on a trailing 12-month basis, according to Mornignstar.com. By comparison, the 10-year US Treasury yield is substantially higher at 4.49%, as of May 6.

For some analysts, the slide in property shares represents a buying opportunity, despite recent delays in expectations for rate cuts by the Federal Reserve. “From where listed REITs are currently priced, I don’t believe the market needs to expect rate cuts for REITs to deliver solid performance,” says Janus Henderson Investors’ Gregory Kuhl. “If the market reaches a solid consensus that rate hikes are off the table, that may be enough to get REITs going. It did seem like Powell took rate hikes off the table [at last week’s Fed meeting], which I think is a positive for REITs.”

Yield differentials may be a factor in REITs’ weak performance, but it’s notable that the utilities sector (XLU), which is also interest-rate sensitive, has rallied lately while XLRE has barely moved. XLU is up 9.5% year to date, a gap that suggests sentiment for property shares suffers from more than concerns about competitive Treasury yields.