Expectations for rate cuts have cooled recently as both Canadian and U.S. banks aren’t ready to reduce interest rates just yet. While there’s talk of higher for longer, the long-term expectation still is that rates will come down, it’s really a matter of if rather than when it happens.
With that in mind, investors may want to consider investing in stocks and investments which can benefit from interest rate cuts when they happen. One area where it could be advantageous to invest is in real estate investment trusts (REITs). REITs are popular for their dividend payments and are generally seen as safe options for income-seeking investors.
But unsurprisingly, with interest rates going higher and investors able to get high yields elsewhere, equities haven’t been as popular over the past few years. One exchange-traded fund (ETF) that has suffered is the BMO Equal Weight REITs ETF (TSX:ZRE). Its valuation has fallen by 26% since 2022.
This, however, can be a good ETF to buy while its price is low. The fund invests in REITs and it has a yield of around 5.2% right now. Once rate cuts take place, the fund could attract more attention from investors who potentially move from bonds back into the equity markets.
With a broad range of REITs in its portfolio, including retail, industrial, healthcare, office, and others, the BMO Equal Weight REITs can give investors some good diversification and balance. While the ETF is down now, it wouldn’t be surprising to see the fund start to rise once interest rates come down.
