No. of Recommendations: 2
In response to the broad issue of 'why consider REITs at all for stagflation rather than other types of stocks?'
A. Here's some data about how regular stocks do _during stagflation_ compared to REITs. You may be surprised.
Note: this is not a REIT-related website specifically, it's from a discussion of stagflation and asset class returns.
See:
https://d2csxpduxe849s.cloudfront.net/media/469BA3...This table breaks down time periods into 'goldilocks', 'disinflation', 'reflation' and 'stagflation'.
Regular stocks do great in the first 3 economic conditions, but they do badly in stagflation.
Interestingly, REITs perform comparably to other stocks in both goldilocks and disinflation.
B. See:
https://wealthgenadvisor.com/navigating-stagflatio....
covering 1973-1982
C. _During stagflation_ in the past, REITs do pretty well and other stocks do pretty terrible. I think we may see stagflation. And REITs are cheap. So that's my angle.
D. However, even in regular times (which this thread is not about), REITs may beat or compare favourably with other stocks, outside of stock bubbles:
An industry article from 2010, after a massive property crash...
See:
https://www.reit.com/sites/default/files/media/Por...If you skip ahead to page 3, you should see the general idea.
" For the 10-year period ended March 31, the FTSE NAREIT All REITs Index delivered a compound annual total
return of 10.95%, and the FTSE NAREIT Equity REITs Index delivered a compound
annual total return of 11.42% – a significant outperformance of the S&P 500, which
provided investors with a compound annual total return of -0.65% over the same period."
"“The long-term annual total returns of the FTSE NAREIT Equity REITs Index typically
have been in the range of 10% or greater,” Grupe said. “Equity REITs also have
outperformed the S&P 500 for the past 15-, 20-, 30- and 35-year periods.”"
E. See:
https://www.reit.com/news/blog/market-commentary/r...(Industry article, rolling 10 year and 20 years returns, 1990-2020, stocks vs REITs)
F. See:
https://www.fool.com/research/reits-vs-stocks/1972-2024
8.0% SP500 annualised return
12.6% NAREIT index annualised return
and you can pick pretty much any timeframe you like outside the last 10 years of bubblemania and I think you'll see the same sort of result.
G. Given that REITs tend to do similarly to other stocks in the long run, better/worse in some conditions, there's an argument for holding both and farming volatility.
See:
https://i.redd.it/65d8ziq1yxbe1.pngH. Having said that, I would probably not invest enthusiastically in REITs at average prices, despite my username.
I. But I think they make sense when they are at near-record valuation lows, while regular stocks in many markets and other assets are basically around record valuation highs.
J. It especially makes sense if you are consciously avoiding the US market, avoiding any sector Trump can tariff or ruin, and avoiding anything at risk from AI (or AI over-investment).
K. About high ROE stocks and stagflation. Hard to say. If it's high ROE because it has great and stable returns with modest assets, sure, should do OK in stagflation? If it's high ROE because it has mediocre returns with almost no equity... maybe no buffer to survive a tough economy? But it's really a topic for a different board.
TRS
