Wall Street Week Ahead – Rising REITs back bets on stronger economy

A street sign for Wall Street is seen outside the New York Stock Exchange in Manhattan, New York CityBy Rodrigo Campos NEW YORK (Reuters) – Investors puzzled over whether U.S. interest rates are rising due to a stronger economy or because of fears about inflation might want to look at the recent gains in REITs for some useful guidance. Real estate investment trusts typically perform poorly in an environment of rising interest rates, as they are used by some investors as a proxy for bonds when fixed income returns pale. Thus, when yields turn higher, REITs are sold among other reasons on expectations of a higher cost for financing real estate acquisitions, and as their dividend yield becomes less competitive against the risk-free return of Treasuries.

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