Fears of a Federal Reserve rate hike have caused the iShares US Real Estate ETF (IYR) to fall over 9% year-to-date. Still, Bob Johnson, CEO of The American College of Financial Services, said historically it is the wrong move to abandon REITs at the start of a tightening cycle. ‘REITs are one of those asset classes that has done well during a rising rate environment,’ said Johnson, who is a proponent of the Fed raising rates sooner rather than later. ‘I think that the investors who have been fleeing REITs may want to reconsider getting back into that sector.’ Similarly, conventional wisdom has always said that emerging markets feel the most pain when the Fed raises rates. The iShares MSCI Emerging Markets (EEM) has fallen 14% so far in 2015 partly because of a fear of a Fed move. Nevertheless, Johnson said the evidence proves otherwise and that emerging market indexes have actually flourished when the Fed is raising rates as they offer a haven for investors from falling developed markets. ‘My coauthors and I studied the markets from 1966 through 2013 and over that time period emerging markets actually did quite well during a rising interest rate environment,’ said Johnson. ‘In fact, they did better than in a falling interest rate environment.’
Subscribe to TheStreetTV on YouTube:
For more content from TheStreet visit:
Check out all our videos:
Follow TheStreet on Twitter:
Like TheStreet on Facebook:
Follow TheStreet on LinkedIn:
Follow TheStreet on Google+:
source
