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A look at REITs in a rising rate environment

Mar. 27, 2015 3:41 PM ETRWR, VNQ, IYR, ICF, SRS, URE, FRI, IFNA, PSR, DRN, DRV, WREI, REK, KBWY, SCHH, FREL, USRTBy: Stephen Alpher, SA News Editor2 Comments
  • Between 1994 and 2013, there have been nine distinct periods in the U.S. of rising interest rates (defined as the 10-year Treasury yield rising more than 100 basis points), says Franklin Real Asset Advisors' Wilson Magee (see chart here). During six of those periods REITs provided positive returns, and in three, negative.
  • In those three negative return occasions, REIT performance also fell shy of the broader market, and in two of those cases significantly so. Of the six positive return outcomes, REITs outperformed the S&P 500 twice.
  • Ultimately, says Magee, as long as rising interest rates reflect a healthy, growing economy (and rise gradually instead of spiking), it should be good for both stocks in general and REITs.
  • Source: Valuewalk
  • ETFs: IYR, VNQ, DRN, URE, SRS, ICF, SCHH, RWR, KBWY, DRV, REK, FRI, FTY, PSR, IFNA, WREI, FREL

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