iBankCoin

REITs Are At New Highs

Quick thoughts on rates and their relationship with stocks:

We found a way to circumvent economic cycles, apparently, and went through a massive hiking cycle without seeing it affect markets or the general economy to any large degree. Now with rates heading lower, Wall Street is already hopping on asset classes that traditionally benefit: namely REITs.


$IYR

REITs are heavily indebted entities who pay out 90% of profits in the form of dividends. Other areas that benefit from lower rates include, but not limited to, industrials, homebuilders, utilities and any company reliant on debt issuance. With rates coming down, those stocks might undergo “multiple expansion” to account for the increased profitability they’re going to enjoy with lower cost to borrow and service their debt.

The only downside to cheaper credit is the potential said credit might one day lead to another bubble. We’ll cross that road once there.

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