Market reactions always seem overdone. Jump on one side of the boat, then when it is about to tip over everyone jumps on the other side of the boat. The last guy to jump ends up getting wet.
In May, when the Bernank started talking about “tapering”, the dividend paying stocks took a large shock. In particular, Real Estate Investment Trusts (REIT’s) were thrown out the window. If you look at the S&P 500 and REIT’s, there is a 28% YTD differential:
The fear is that interest rates will rise (rapidly) and REIT’s will get squeezed by higher funding costs on the real estate AND bonds will look more attractive versus real estate investments. My guess is that rates will not rise as rapidly as what the market is pricing in. My guess is that REIT’s will do better than the S&P 500 in the next 12 months.