The outlook for REIT ETFs (IYR, RWR, VNQ)

Includes: IYR, RWR, VNQ
by: J.D. Steinhilber

From J.D. Steinhilber, founder of ETF newsletter and investment management firm Agile Investing:

The persistent overvaluation of Treasury bonds creates a real challenge for our approach to asset allocation because the extremely low nominal and real yields offered in the bond market support continuing over-valuations in a number of other asset classes that are closely tied to the Treasury yield curve, such as REITs, corporate bonds and high yield bonds. [REIT ETFs: IYR, RWR, VNQ.]

In our view, it is not a favorable time to be reaching for extra yield in these other asset classes because not only are their spreads to Treasuries narrow, but Treasuries themselves are overpriced under a traditional “real return