"Real estate investment trusts live and die by the cost of capital. When long-term interest rates fall, REIT dividends become more attractive relative to bonds, and property valuations rise as discount rates compress. The catalyst to watch: Federal Reserve rate cuts and the trajectory of the 10-year Treasury yield. Analysts are eyeing the 10-year Treasury yield moving below 4% as a key inflection point that could unlock meaningful upside for SCHH."
"Lower rates would ease refinancing pressure on the fund's underlying holdings, which include everything from healthcare facilities to industrial warehouses. 2026 is being positioned as an inflection year when rate cuts could finally translate into tangible benefits for real estate. Monitor the Federal Reserve's policy announcements and monthly Treasury auction results. The 10-year yield is published daily by the U.S. Department of the Treasury, and any sustained move below 4% would signal a more favorable environment for REIT valuations."
The Schwab U.S. REIT ETF (SCHH) is up 1.6% year-to-date and faces $162 billion in commercial real estate loans maturing in 2026. Fund performance depends on refinancing conditions and cost of capital. Federal Reserve rate cuts and a sustained drop in the 10-year Treasury yield below 4% are seen as the primary catalysts to ease refinancing pressure and lift REIT valuations. Market participants should monitor Fed policy announcements and monthly Treasury auction results for directional signals. SCHH has concentrated exposure to top holdings: Welltower (9.2%), Prologis (9.0%), and Equinix (4.8%), which collectively influence fund returns.
Read at 24/7 Wall St.
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