Malcolm Gladwell, renowned for his insights on social epidemics, penned an influential article in the New Yorker called “The Tipping Point,” which delves into the sudden and unexpected popularity of ideas, products, and behaviors. Understanding social epidemics involves analyzing the people who cause them, the content being spread, and the environment in which they take place.
Looking Back at the REIT Sector
Writing since 2010, I’ve observed the REIT sector’s journey, especially after the Great Recession, which saw a drop of 72% in REITs’ performance (represented by VNQ) from Jan 2007 to March 2009. However, from 2010 through 2019, REITs witnessed a solid performance, with shares growing by 107%, averaging 11.9% annually excluding dividends.
Subsequently, the taper tantrum in 2013 sparked panic as investors became apprehensive about the end of the quantitative easing program by the Federal Reserve. As a result, REIT shares underperformed after three subsequent years of outperformance. The years to follow witnessed a mix of highs and lows in REIT returns.
The Impact of the Global Pandemic
Covid-19 brought about the fourth recession in my investing career. REITs (represented by VNQ) have fallen by 18% since January 2020, compared to SPDR® S&P 500 ETF Trust (SPY), which has grown by 35%. 2023 has proven to be a challenging year for REITs, as evidenced by the VNQ -8.4% year-to-date performance.
It is essential to note that not all REITs should be generalized. Contrary to the overall negative sentiment, various REITs continue to show resilience and opportunity for strategic investments.
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