The American manufacturing powerhouse has returned and is now seizing the right time to invest in REITs.
2024/11/09
Key Summary
It is widely known that after Trump took office as President of the United States, increasing external tariffs and implementing significant domestic tax cuts became key strategies in his "America First" policy. Naturally, "Made in America" will reshape the U.S. industrial landscape. Among the beneficiaries stands out the U.S. REITs sector. Not only do REITs provide steady dividend yields, but the gradual interest rate cuts and supportive policy effects from “Made in America” also present capital gain opportunities.
'Made in America' to Strongly Boost U.S. REITs
Many investors may associate REITs with traditional real estate. Indeed, prior to 2010, U.S. REITs primarily focused on retail, residential, and office properties. However, in response to geopolitical tensions and supply chain disruptions caused by the pandemic, both Republicans and Democrats have made "reshoring manufacturing" a central goal. This has led to a structural shift in the REITs industry. For example, demand for industrial and office spaces has risen significantly as multinational firms increase their U.S. operations. (See the purple and brown sections in the chart below)
Furthermore, with the rise of AI, big data, and automation, REITs tied to physical assets like communication towers and data centers are emerging as major players (See yellow and orange sections in the chart below). These REITs not only provide traditional yields but also have growth potential—offering the best of both worlds.
U.S. REITs Sector Distribution
Industrial, communication towers, and data centers are becoming the new mainstream
Source: FTSE Nareit All Equity REITs Index, data as of 12/31/2010 and 10/31/2023. Past performance is not a reliable indicator of current or future results. Charts are based on index simulation and do not represent actual fund performance. Investors cannot invest directly in an index.
U.S. REITs Dominate the Global Market
From an investment perspective, U.S. REITs offer superior market value and income potential compared to stocks. According to statistics, the annualized yield of U.S. REITs is 3.7%, compared to only 1.3% for the U.S. stock index. Additionally, U.S. REITs account for 67% of global REITs market value—significantly surpassing U.S. equities’ global share of 45% and U.S. Treasuries’ 40%. This confirms the unmatched global dominance of U.S. REITs. (Source: BAML, Bloomberg, Federal Reserve, FTSE, NCREIF, Russell, as of 10/31/2024)
U.S. REITs account for 2/3 of global REITs market value
Source: EPRA, J.P. Morgan Asset Management, as of 12/31/2023.
REITs’ Long-Term Return Advantage
Since 2009, U.S. REITs have surged 650%, outperforming U.S. convertible bonds (506%) and preferred shares (223%). Since 2000, cumulative total returns for REITs have reached 1,009%, far exceeding the U.S. housing index at 227%. (Source: Bloomberg, from 12/31/1999 to 10/31/2024)
Long-term performance comparison: U.S. REITs vs Convertibles & Preferreds
Source: Bloomberg, data from 03/31/2009 to 10/31/2024. U.S. REITs = FTSE NAREIT All Equity REITs Index, Preferred = BAML Hybrid Preferred Securities, Convertibles = Bloomberg Convertible Bond Index. Charts are simulations and not indicative of fund performance. Investors cannot invest directly in indices.
Rate-Cutting Era Brings Capital Gain Potential for REITs
According to the Fed’s statement on November 7, a slow rate cut policy is expected for 2025. Historically, REITs perform well during rate cut cycles. For example, over the past decade when U.S. Treasury yields declined and the economy grew, REITs delivered 19.6% average return—higher than 7.2% for convertibles and 9.5% for preferreds.
Alternative asset returns during falling U.S. Treasury yields and economic growth
Source: Bloomberg, data from 03/31/2014 to 03/31/2024. U.S. REITs = FTSE NAREIT Index, Convertibles = Bloomberg Convertible Bond Index, Preferreds = BAML Hybrid Preferred Securities. Includes 4 periods when 10-year Treasury yields dropped 80+ bps and economy didn’t decline. Past performance is not a reliable indicator of future results.
Given the Fed’s three rate cuts in September and November 2024, and the market’s expectations for 2025, REITs continue to present capital gain opportunities. However, with Trump clearly stating he will raise tariffs and cut domestic taxes, uncertainty remains. If his tax cuts trigger rising bond yields or trade wars spark economic slowdown, REITs could come under pressure.
Take Advantage of Flagship U.S. Products and the New 'Made in America' Economy
To fully capture REITs’ yield advantage in a rate-cutting and “Made in America” environment, we recommend investors consider the multi-asset-based JPMorgan U.S. High Income Multi-Asset Fund (This fund invests in high-yield, non-investment-grade bonds and distributions may include principal or equalization).
If the economy slows, the fund can still deliver income via U.S. corporate bond coupons, dividends from real assets, and covered calls on U.S. quality growth stocks—while reducing volatility. (Investors should consider the risks of using derivatives and leveraged strategies. See prospectus for details.)
Whether or not Trump succeeds in making America “Great Again,” U.S. multi-asset remains one of the simplest and most effective wealth tools given its dominant global position.