Leadership has broadened in the U.S. equity market to begin 2026, benefiting sectors outside of technology. Cyclical sectors like energy and materials are the strongest performers year-to-date, but we expect additional rotation into other value-oriented sectors. One that is showing improved momentum in absolute and relative terms is the real estate sector. Data center REITs, in particular, are intriguing group to watch as participation broadens given their tie to the AI investment theme. The iShares U.S. Real Estate ETF (IYR) has been stuck in a trading range over the past year, contributing to underperformance versus the S & P 500 Index (SPX). However, intermediate-term momentum turned positive in late January, increasing the probability of a breakout above resistance near $98. A sustained move above that level would target the 2024 high near $103. Relative performance for REITs has also stabilized following an oversold "buy" signal from the DeMark Indicators in IYR versus the SPX, which supports improved performance for the next 6-8 weeks. Simon Property Group was a top-five performer within the real estate sector last year, gaining roughly 7.5%. Its technical picture is bullish, highlighted by a renewed long-term uptrend following a breakout to new multiyear highs above long-term resistance near $191. SPG has also regained support from its monthly moving average convergence/divergence, or MACD, indicator giving us greater confidence in the uptrend. Beyond current levels, major resistance does not appear until the 2016 high near $229. Data center REITs like Equinix appear to be reversing their cyclical downtrends. A bullish reversal would be confirmed by EQIX once it posts two consecutive weekly closes above resistance from the cloud model near $848. If this occurs, it would be a bullish long-term development, suggesting EQIX can trend higher toward final resistance near $994 over the course of the next several months. EQIX looks extended, but a breakout would tell us to defer to positive momentum. Overall, REITs look improved from a technical perspective as a function of the year-to-date sector rotation, with improving momentum and a firmer relative-performance backdrop versus the SPX. We have already seen a confirmed breakout in Simon Property, and Equinix looks primed to confirm a breakout of its own, as positive signs for the broader sector.
-- Katie Stockton with Will Tamplin.
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