Market Insights: 🏘️ Three Reasons Why REITs Could Rally in 2026

🏠 Three Reasons Why REITs Could Rally in 2026

While equity markets have surged over the past year, Real Estate Investment Trusts (REITs) have been left behind. The MSCI US REIT Index is up just 5.4% year-to-date, compared with a 16.1% gain for the S&P 500.

On the surface, that gap makes REITs look uninteresting. But history suggests that periods of underperformance often precede some of the strongest returns.

With interest rates nearing a turning point, equity valuations stretched, and income assets back in demand, REITs may be approaching a more favourable part of the cycle.

We walk through that later in this article. But first…

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Quote of the week

"“Don’t wait to buy real estate. Buy real estate and wait." 

Will Rogers

What Happened In The Markets This Week?

Here’s a quick summary of what’s been going on:

💄 L’Oréal snaps up Kering’s luxury beauty portfolio in €4B power play (Yahoo Finance)

• L’Oréal will acquire Kering’s entire premium beauty business for €4B, including 50-year licences for Gucci, Bottega Veneta and Balenciaga beauty lines, plus the Creed fragrance house. 

• The deal strengthens L’Oréal’s lead in luxury beauty while helping Kering cut debt and refocus on struggling core brands like Gucci.

• It also reshapes the competitive landscape: Kering exits beauty just as conglomerates like LVMH double down on high-end cosmetics, raising questions about long-term brand control.

• A new L’Oréal–Kering wellness JV signals the next frontier of luxury diversification.

• Investors should view this as further consolidation in a sector where scale increasingly drives pricing power and global reach.

📈 Netflix emerges as top bidder for Warner Bros Discovery (Reuters)

• Netflix has reportedly offered the highest bid and entered exclusive talks to buy Warner Bros Discovery, backed by a $5B breakup fee if regulators block the deal. 

• A deal would merge Netflix with HBO Max and Warner’s studio assets – a potential industry reshaping combination.

• Rivals, including Paramount and Comcast, are protesting an allegedly biased sale process.

• Hollywood producers have begun lobbying Congress, warning the merger could concentrate too much power.

• Investors should brace for major consolidation signals across streaming if this moves forward.

To see our take on these market stories below, simply check out the full article.

• 🤖 Salesforce lifts forecasts as AI agent demand surges

• 🪙 Bitcoin treasury stocks face their first real stress test

Now let’s dive into the main piece.

Should REITs be in your portfolio next year?

As mentioned, the current economic environment is showing signals of becoming a turning point for the recent underperformance of REITs. 

We found three forces that could reshape REIT performance next year and beyond.

1. REITs have outperformed stocks in rate-cutting environments

Over the past 50 years, US REITs have consistently outperformed US equities following Fed rate cuts, delivering a 9.48% annualized return in the 12 months after a cut, compared to 7.57% for US stocks over the same period.

Rate cuts are a powerful catalyst for REITs because they reduce borrowing costs. As a result, REITs can more easily refinance debt and complete acquisitions.

Sources: Invesco and Bloomberg L.P., since earliest common inception. Monthly return data analyzed between Jan. 1, 1976–July 31, 2025. - Simply Wall St

Historical patterns also show that the strength of post–rate cut returns has varied with economic conditions. Across the past 14 easing cycles, REITs delivered their best outcomes when the economy avoided a recession, returning 28.98% in the following 12 months. Even across all cycles, the average return was 10.75%, reinforcing that lower borrowing costs have reliably supported real estate performance over time.

REITs have lagged the market this year, but history shows they often outperform when the rate cycle turns.

In this week’s big story, we break down why 2026 could look very different for real estate investors and where the real opportunities may be hiding.

Here’s what the full piece covers:

🧭 Why REITs tend to outperform after Fed rate cuts
and what the past 14 easing cycles tell us about return patterns.

🏗️ Which REIT sectors have the strongest tailwinds
in the coming years.

🛡️ The largest REITs in the US, UK, Canada, Australia and India

to show you how diversification can look across geographies.

💬 Join the discussion by leaving a comment!

Do you have REITs in your portfolio?

Key Events Next Week

Tuesday

• 🇦🇺 RBA Interest Rate Decision
  
  • 📉 Forecast: 3.6%, Previous: 3.6%
    
  • ➡️ Why it matters: Even a hold is market-moving right now. With Australia’s inflation still sticky, any shift in tone from the RBA could influence bond yields, the AUD, and rate-sensitive sectors like property and tech.

Wednesday

• 🇨🇳 China Inflation Rate YoY
  
  • 📈 Forecast: 0.5%, Previous: 0.2%
  • ➡️ Why it matters: China has battled deflation all year. A pickup in prices suggests improving demand, which is positive for global commodities, Australian exporters, and overall risk sentiment.

Thursday

• 🇺🇸 Fed Interest Rate Decision
  
  • 📈 Forecast: 3.75%, Previous: 4.0%
    
  • ➡️ Why it matters: A potential Fed cut sets the tone for global markets. Equities, bonds, the USD, and risk sentiment will all react instantly.

Until next week. Invest well.

Simply Wall St