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Real Estate Investment Trusts

The Wild World of REITS

By Roger S. Conrad, on Jan. 19, 2017

Don’t expect the Federal Reserve’s planned rate hikes to do lasting damage to REITs, at least the well-run ones. The last time the Fed tightened credit significantly was between June 2004 and June 2006, when it raised the federal funds rate from 1 to 5.25 percent.

Over that time, the Dow Jones US Real Estate Index belied REITs’ image as mere bond substitutes by returning nearly 60 percent. This time around, the index has returned 11.4 percent since the Fed began talking about tightening monetary policy in May 2013.

To be sure, REITs have taken periodic hits in reaction to expectations for rising interest rates. That was the catalyst for the selloff in the second half of 2013, as well as immediately following the November 2016 US election.

But over any period that counts to buy-and-hold investors, REITs have followed their business prospects, just like any other group of stocks.

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