The interest rate expectations have had anything but smooth sailing in 2026.
The year kicked off with an anticipation of a rate cut, which gave way to inflationary pressure and a rate hike.
Yet, with the job market dipping into negative territory and inflation staying subdued, the expectations have flipped again.According to the CME FedWatch tool, the odds of a rate hike at the Fed’s September meeting have sunk to a new low at just 32.14%, paving the way for new equity highs.While headlines remain glued to big tech, two rate-sensitive sectors emerged as winners – the Communication Services Select Sector SPDR Fund (NYSE:XLC) and the Real Estate Select Sector SPDR Fund (NYSE:XLRE).Both ETFs were among the strongest-performing S&P 500 sector funds yesterday, rising by 2.07% and 1.42%, respectively.
Their outperformance is a positive sign, particularly for the former, which is still down about 4.8% year to date.Long-Duration XLC Growth Gets a Re-RatingCommunication services is packed with long-duration cash-flow compounders.
When yields fall, the present value of those future earnings jumps.
