REITs and High-Yield Stocks: Your Defensive Play Against Tariffs

Ladies and gentlemen, the market is in turmoil! Tariffs are skyrocketing, and the stock market is taking a nasty tumble. But don’t panic! There’s a silver lining in this storm, and it’s shining brightly in the form of Real Estate Investment Trusts (REITs) and high-yield stocks. These are your defensive plays against the economic chaos caused by tariffs. Let’s dive in and see why!



First things first, let’s talk about the 10-year Treasury yield. It’s fallen below 4%, way off its peak above 4.75% earlier this year. This decline is a game-changer for REITs. As the yield falls, the value of commercial real estate tends to rise. It also makes it much cheaper to borrow money to fund new real estate investments and refinance existing debt. BOOM! This is a no-brainer for investors looking to hedge against tariff-induced market volatility.

Now, let’s talk about the REITs that are leading the charge. Realty Income (NYSE: O) and W. P. Carey (NYSE: WPC) are two low-risk REITs that you need to consider buying amid the market turmoil. Realty Income owns a globally diversified portfolio of commercial real estate, including retail, industrial, gaming, and other properties. It net leases these properties to many of the world's leading companies, providing very stable income because tenants cover all operating costs, including routine maintenance, real estate taxes, and building insurance. The REIT pays out about 75% of its stable cash flow in dividends, offering a current yield of 5.7%. It retains the rest to invest in additional income-producing properties. Realty Income also has one of the strongest balance sheets in the sector, giving it additional flexibility to invest in income-generating properties.

W. P. Carey also owns a globally diversified real estate portfolio, including industrial, warehouse, retail, self-storage, and other properties, net leased to high-quality tenants. The stable cash flow from those leases supports its high-yielding dividend of 5.9%. The REIT grows that payout by investing in additional income-generating properties. However, given the uncertainty in the broader market, particularly over the direction of interest rates and other macroeconomic factors, the company offered conservative investment guidance to start the year. It expects to invest between $1 billion and $1.5 billion this year.



Historically, REITs have shown defensive characteristics during periods of heightened trade tensions and tariffs. They tend to perform well during economic downturns and periods of market volatility. For instance, during the last six recessions, REITs outperformed private real estate in the four quarters before a recession, during a recession, and in the four quarters after a recession. This is because real estate often holds its value better than other assets during economic downturns, providing a degree of stability. Additionally, REITs can be bought and sold like stocks on major exchanges, providing the liquidity that direct real estate investments typically lack. This liquidity can be particularly valuable during periods of market turmoil, as investors seek to rebalance their portfolios.

High-yield stocks, which include REITs, tend to have stable cash flows and high dividend yields. For example, Realty Income pays out about 75% of its stable cash flow in dividends, providing a current yield of 5.7%. This stable income stream can be particularly attractive to investors during periods of market volatility, as it provides a reliable source of returns even when stock prices are falling. Similarly, W. P. Carey supports its high-yielding dividend of 5.9% through stable cash flow from its net leases.

REITs and high-yield stocks are less dependent on global trade compared to other sectors. For instance, the U.S. economy is less dependent on trade compared with its largest trading partners, with total trade representing roughly 25% of U.S. GDP in 2023. This means that REITs and high-yield stocks are less exposed to the potential negative impacts of tariffs and trade disruptions, making them more defensive investments during periods of heightened trade tensions.

Finally, REITs and high-yield stocks can benefit from lower interest rates, which are often a result of trade tensions and tariffs. For example, the yield on U.S. Treasury bonds has declined due to market turmoil, with the 10-year note's yield falling below 4%. This decline in interest rates can make it much cheaper to borrow money to fund new real estate investments and refinance existing debt, providing a boost to REITs and high-yield stocks.

So, what are you waiting for? Get into REITs and high-yield stocks now! They are your defensive plays against the economic impacts of tariffs. Don’t miss out on this opportunity to hedge your portfolio against market volatility. BUY NOW!