Why REITs aren't getting killed by rising interest rates this time around
The headline suggests that the resilience of REITs in the face of rising interest rates is attributed to strong real estate fundamentals. This differs from historical trends where REITs performed poorly during rate hikes. Current market dynamics hint at investors reassessing risk based on intrinsic value and cash flow stability rather than solely reacting to rate changes—a shift that could reflect broader investor sentiment across asset classes. The implications for FX could hinge on how these dynamics influence capital flows towards or away from currencies tied to regions with stronger real estate performance.
Where it sits in our coverage
Our consensus EUR/USD target sits at 1.075 (median across 8 firms), with Goldman at the upper bound (1.12) and BofA at the lower (1.04). CNBC's view aligns more closely with the upper third — JPMorgan and ING share that framing.
How firms align
JPMorgan has positioned itself with a target of 1.10 by March 2026, resonating with the belief that economic fundamentals can mitigate the effects of rising interest rates. In contrast, BofA's more bearish outlook at 1.04 reflects a cautious approach, suggesting potential headwinds for growth.
What the data shows
Recent research indicates a solid performance of real estate assets, which could keep investor confidence elevated despite interest rate pressures. For additional context, see our related Insight on market volatility at /research/market-volatility.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01REIT resilience suggests a shift in investor focus towards fundamentals.
- 02Strong fundamentals may attract foreign capital, impacting the EUR/USD.
- 03Watch for signals around the 1.075 consensus level for potential volatility.
- 04Market responses to rate changes could alter FX dynamics significantly.
Market implications
Monitor the EUR/USD movements closely as it approaches the 1.075 consensus level. Additionally, be aware of upcoming economic releases that could shift investor sentiment towards real estate factors, impacting currency positions.
Risks to this view
A significant reversal might occur if a major shift in real estate fundamentals is observed, such as a drastic fall in property values or rental income, which would adversely affect REITs and investor confidence across markets.
Sentiment by currency
USD~EUR~JPY~GBP~Composite USD score: +0.00
Sources & References
How we cover this story