Escalating tariff threats are continuing to lead to whipsawing market prices, creating a murky near-term horizon for investors. Long-term risks are certainly bubbling up as well. Earlier, Goldman Sachs raised its odds of the U.S. entering a recession to 45%. To make matters far first, Goldman Sachs had just raised the odds to 35% the week prior. This dour macro environment has sent many advisors and investors scrambling for new ways to position their portfolios. One advantageous way to do so is to look for asset classes outside the traditional equity market. Among these options, real estate investment trusts (REITs) could offer a uniquely compelling opportunity for portfolios. Notably, there are a wide number of reasons why picking up REITs could be a good solution to market woes.
To start, REITs tend to have a lower correlation to the stock market when compared to traditional equity strategies. By investing in REITs, advisors and investors could tap into yield and portfolio growth, even when the market is in a sour spot.
Where REITs do see some correlation is when it comes to interest rates. While rate cut expectations were more tepid at the start of the year, the potential of two or three more cuts for 2025 are becoming a growing possibility. Historically, REITs have performed exceptionally well when interest rates drop.
Looking long-term, REITs could also be applied as a long-term resilient play against a potential recession. If a recession occurs, REITs could very well function as a portfolio ballast that can also generate strong yield.
Exploring the Use Case for VNQ
When it comes to choosing a REIT ETF, the Vanguard Real Estate ETF (VNQ ) could quickly emerge as a standout option. VNQ taps into Vanguard’s extensive market experience to provide exposure to a wide variety of REIT sectors.
As of March 31st, 2025, VNQ’s market price declined about 2.5% over the last month. However, this price drop could very well work in the favor of advisors.
The long-term outlook for REITs still looks sunny. As such, investors and advisors could buy the dip in VNQ to get ahead of rebounding returns from REITs.
For more news, information, and analysis, visit the Fixed Income Channel.
