Rectangle//REITs and the Economy
Neutral pattern.
A rectangle is a horizontal trading channel that binds price action.
In order to grow, REITs need to raise external debt and equity capital from investors. As a result, higher interest rates increase a REIT's cost of debt and make it incrementally harder to achieve profitable growth.
During periods of economic growth, REIT prices tend to rise along with interest rates. The reason is that a growing economy increases the value of REITs because the value of their underlying real estate assets increases. In a growing economy, the demand for financing also increases, resulting in increased interest rates. Conversely, in a slowing economy, when the Fed is tightening money, the relationship turns negative.
No recommendation
A rectangle is a horizontal trading channel that binds price action.
In order to grow, REITs need to raise external debt and equity capital from investors. As a result, higher interest rates increase a REIT's cost of debt and make it incrementally harder to achieve profitable growth.
During periods of economic growth, REIT prices tend to rise along with interest rates. The reason is that a growing economy increases the value of REITs because the value of their underlying real estate assets increases. In a growing economy, the demand for financing also increases, resulting in increased interest rates. Conversely, in a slowing economy, when the Fed is tightening money, the relationship turns negative.
No recommendation
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