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One Key Slice of the Market Is Crumbling While Stocks Set Record Highs

Nary a day goes by anymore, it seems, without the Dow Jones Industrials (^DJI) and S&P 500 (^GSPC) setting fresh, new all-time highs. In fact, in the past month alone, these large-cap indexes have raised the bar to unprecedented heights on ten different occasions.

And yet, amidst this daily coronation of capitalism, one key industry has quietly been left in the dust, at a time when every single one of its peers have been taking part in the rally.

Specifically, the real estate group is down almost five percent (depending on which barometer you use, IYR, ^RMZ, RWR) in the past 30 days at a time when the S&P has advanced 2.5%, and other groups such as Retailing and Transportation are up more than six percent.

To some, this could be seen as an early sign that investors are losing faith in one of the most economically critical sectors, while others simply see the price discrepancy as an opportunity.

"I actually like the apartment REITs even though they've been under pressure," says Jeff Saut, chief investment strategist at Raymond James, pointing to what he calls a "second derivative theme" that bodes well for the group.

"You've got 23 million 19 to 34 year-olds that are either doubled-up or tripled-up with roommates or living at home with their parents," Saut points out in the attached video. "And as the economy strengthens, which is what I think we'll see in the new year, they're moving out."

His point is that instead of running from REITs, it is time to run to them.

"So the timing of looking at these down-trodden sectors or groups, I think, is perfect."

To be sure, the past month has also seen the yield on the 10-year Treasury creep back up to 2.75% from 2.5%, largely because investors are increasingly worrying about the Fed reining-in its bond buying program when they meet next month.

Whether that actually happens, or as Saut thinks, tapering gets put off for several more months, the overall markets looks vulnerable in the short-term and attractive in the long term.,

"I think if you look at the lumber futures, which have been pretty perky here, they're telling you there's going to be a housing rebound" Saut argues, despite what the real estate stock indexes might be suggesting in the short-term.