REITs Are Undervalued Relative To The S&P

The MSCI US REIT price only index (RMZ) has turned negative YTD while the broader market surges higher.

I postulate that this divergence is the product of misunderstanding about how economic forces impact REIT fundamentals. Further, I believe that, given the valuation difference, REITs are opportunistic relative to the S&P.

The divergence between REITs and the S&P began in early 2017, as seen below. Note that this is around the time it became likely that tax reform was going to happen.

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