Bet On These 4 Industrial REITs Despite No Rate Cut By Fed
Zacks Investment Research | Dec 11, 2019 08:56PM ET
As anticipated, this time the Federal Reserve kept interest rates unchanged at the end of its two-day policy meeting in the 1.5-1.75% target range. Further, the “dot plot” of individual member’s projection for the future suggests lesser chances of any rate hike or cut in 2020.
The move comes after the benchmark rate was slashed thrice this year, in a bid to shield the economy amid global economic slowdown, recession fears and the long-standing U.S.-Sino trade war.
Obviously, the Fed’s neutral stance does not provide enough impetus to the rate-sensitive REIT sector, as compared with a rate cut. This is because of REITs’ historical dependence on debt for their business as well as for often being treated as bond substitutes for their high-dividend paying nature.
However, instead of fretting over the central bank’s neutral stance, we ought to shift attention to the slew of favorable economic data ruling the headlines, of late. This includes the latest numbers from the Labor Department, indicating a robust job market with increase in non-farm payrolls and fall in unemployment rate in November. Moreover, consumer sentiment remains high and spending continues to be resilient. The economy, currently in its record 11th year of expansion, is still reporting growth, though at a sluggish pace, and consumers are anticipated to keep the momentum going.
For REITs, this can be far more rewarding because its business usually buoys up on a stepped-up economy and job scenario. And with individual market dynamics playing a critical role in determining REITs’ performance, favorable conditions only pump up chances of further growth.
This draws our attention to the industrial real estate category that has Zacks Investment Research
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