TRADE ALERT - International Portfolio September 2025

The US REIT market surged by 5.4% on average in the past weeks as it became increasingly clear that the Fed would soon resume rate cuts:

Data by YCharts

But some foreign REIT markets not only missed out on this rally, but even sold off in recent weeks, making them quite a bit cheaper than their US peers.

Rate cuts are happening on a different schedule elsewhere in the world, so some of this disconnect makes sense. But over the long run, there is a significant correlation between the monetary policies in the US and in Europe. Both economies are closely linked and therefore, slower growth in the US is likely to spill over into Europe, pushing the European Central Bank to also cut rates.

Similarly, global factors like energy, supply chains, trade wars, etc., drive inflation, leading to similar pressure to cut or hike interest rates.

Finally, capital flows are also global. If the Fed cuts, even as the ECB keeps rates steady, the dollar may weaken, putting pressure on the ECB to follow. Rate cuts in the US could also increase demand for European stocks, particularly REITs, from US-based investors as they look for better, higher-yielding alternatives.

All of this to say that the recent disconnect between the US REIT market (rising) and the European REIT market (declining) could be an opportunity to accumulate more European REITs, while they are historically cheap. This volatility is driven by interest rates, as their respective Central Banks are cutting rates on a different schedule, but over the long run, this should correct itself with a lag.

This brings us today's opportunity: