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Comment: Is real estate the silver lining?

David Krein, senior director for institutional markets at Dow Jones Indexes, says that while financial sector stocks slump, the real estate sector has outperformed the US market by more than 10 per cent so far this year.

Is there any silver lining in the current volatile financial services market? The year-to-date performance of the financials industry has underperformed the broad US market by 5.3 per cent. However, real estate, a more granular slice of the financials industry, has outperformed the broad US market by 11.54 per cent.

Across all 19 supersectors in the Industry Classification Benchmark system, real estate happens to have the second highest year to date performance with a decline of 5.10 per cent, lagging only retail, which is down 4.77 per cent. The Dow Jones Wilshire U.S. Financials Index is down 21.94 per cent this year and the banks index is down 11.16 per cent.

At the company level, who has been avoiding the market fallout from the credit crisis? None other than the Fortune 500's largest company in the world as measured by revenue: Wal-Mart.
As of September 26, its stock price is up 27.73 per cent for the year to date. Not only working to prop up the Dow Jones Industrial Average, Wal-Mart also is a member of the Dow Jones Wilshire U.S. Broadline Retailers Index, which comprises 18 companies and has produced a year to date gain of 8.43 per cent.

The Dow Jones Industrial Average closed last Friday at 11143.13, up 121.07 points (1.10 per cent), rising as high as 11168.06 and dipping as low as 10868.82. The DJIA fell 245.31 points (2.32 per cent) during the week, having declined two weeks running and over six of the past seven weeks, a period during which it is down 5.0 per cent.

The index has dropped 3021.40 points, or 21.33 per cent, from its record close of 14164.53 on October 9, 2007, and by 14.67 per cent from its 2008 close high of 13058.20 on May 2.

The index is up 5.0 per cent from its year close low of 10609.66 on September 17, but so far in September the DJIA is down 3.47 per cent. In August the index gained 1.45 per cent, but it is down 15.99 per cent for the year to date.

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