REITs, or real estate investment trusts, own, operate or finance income-producing properties. Due to their dynamics, they are strong performers in inflationary and recessionary environments. Although inflation eased for the second successive month in November, the fight against inflation is far from over, with the Fed raising the benchmark interest rate to the highest level in 15 years and hinting at continued increases through 2023.
As inflation remains elevated, REITs can increase rents and then pass that income on to shareholders as dividends. With the Fed indicating that it will raise the interest rates through next year, a recession might be on the cards. Therefore, investors could cushion their portfolios by adding fundamentally strong REITs.
