REITs Usually Underperform When Interest Rates Are Rising. Not This Year. Here's Why.
Fundamentals are driving REITs higher despite rising interest rates.
Real estate investment trusts (REITs) generally underperform when interest rates rise, but this year has been an exception. This is due to various factors beyond just interest rates, such as cash flow growth, real estate supply-and-demand dynamics, and valuations. Post-pandemic headwinds have eased, and the U.S. economy remains strong, with a robust GDP growth rate and low unemployment.
Additionally, the Federal Reserve has been cautious about raising interest rates, which has contributed to REITs' strong performance. Specific sectors, like data centers and healthcare, have shown remarkable growth, further boosting REITs' attractiveness. Overall, REITs seem to be an appealing investment option in the current economic landscape.
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