Dividend-paying, specialized REITs aren’t flashy — and that’s the point. – Getty Images/iStockphoto
When the U.S. Commerce Department unveils first-quarter gross domestic product numbers on Wednesday, don’t expect champagne corks to be popping on Wall Street.
Economists at the Wall Street Journal are forecasting economic growth at a measly 0.4%, a gut punch compared with the robust 2.4% the U.S. enjoyed in the fourth quarter of 2024. This isn’t a graceful slowdown — it’s more like coasting in neutral, praying we don’t have to start pushing.
What’s behind this economic illusion? U.S. businesses panicked and imported everything that wasn’t nailed down in a desperate attempt to dodge President Donald Trump’s tariffs. Unfortunately, imports count directly against GDP, turning a temporary hoarding frenzy into lasting economic heartburn.
Sure, warehouses are packed now, but soon enough they’ll be emptier than campaign promises after Election Day.
Meanwhile, despite two years of Federal Reserve Chair Jerome Powell hitting the economy’s brakes, U.S. inflation stubbornly refuses to take the hint. The Fed’s preferred inflation gauge — the core personal consumption expenditures price index — is still hovering, irritatingly, at , ignoring the central bank’s 2% target.
Mortgage rates remain brutally high, punishing prospective home buyers with an average interest rate — a figure financial experts classify under the technical term “ouch.” Americans have also racked up a record-high in credit-card debt.
Powell now finds himself wedged between the proverbial rock and a slightly harder place. Cutting interest rates to avoid a recession sounds tempting — until inflation raids the economy again. But holding rates at a higher level might push the country into recession.
Bond traders — never known for cheerful optimism — have kept the 10-year Treasury yield around 4.2%, betting Powell won’t blink first. But if GDP numbers land with a thud on Wednesday, expect yields to tumble.
Corporate America smelled trouble early. Executives have carefully translated “we’re worried” into polite Wall Street English during recent earnings calls— using phrases like “softening demand” and “margin pressures.” Translation: Buckle up. Investors should pay attention, even if politicians prefer to point at shiny distractions.
Speaking of shiny distractions, the White House is facing its own credibility gap. Championing fractional GDP growth feels tone-deaf when grocery-store receipts look like car payments, and when the national debt exceeds $36.22 trillion.
Political spin, that endlessly renewable Washington resource, will undoubtedly fill the air after Wednesday’s economic report. Republicans will trumpet even fractional growth as proof of tariff wizardry, brilliant economic stewardship and sheer presidential genius.
Meanwhile, Democrats will eagerly lament missed opportunities, wasted potential and fiscal misadventures — conveniently forgetting their own enthusiastic participation in decades of bipartisan budgetary binges.
Neither side’s spin fully persuades an American public still nursing bruises from persistent inflation sticker shock and wondering how $4 milk became the “new normal.”
Amid this partisan whirlwind, investors face a few straightforward decisions. Sure, volatility makes stomachs churn, but it also creates opportunities.
Shares of sturdy dividend-paying companies — particularly reassuring businesses in the healthcare, consumer staples and utilities sectors — tend to weather these economic storms best. For those who’d rather sleep peacefully, short-term Treasury bills maturing in one to two years — currently offering yields of around 3.9% — remain a solid refuge. They’re secure enough to help you rest easy, without the worry of long-term commitments. Like Vegas weddings, sometimes shorter really is better.
Beyond these traditional safe havens, there’s another investment investors often overlook, one that is especially appealing if interest rates begin to fall: real-estate investment trusts.
One caution: not all REITs are created equal. Plenty of them own hotels, office towers or malls — exactly the types of properties vulnerable to economic hiccups, recessions and tariff tantrums.
Instead, focus on REITs that hold recession-resistant and tariff-proof essentials — hospitals, senior housing, medical offices, data centers, cell towers, farmland — basic infrastructure people rely on no matter the economic weather. These aren’t flashy, but neither is plumbing, and you’d miss that terribly if it vanished tomorrow.
Thanks to recent Fed rate hikes, quality REITs are priced like knockoff watches sold on street corners. Once the Fed pivots — and bond markets seem confident it soon will — these discounted real-estate investments could swiftly rebound, delivering both strong dividends and solid capital appreciation.
True, REIT dividends are typically subject to ordinary income-tax rates — not the lower rate stock dividends enjoy — but remember that REITs dodge corporate taxes altogether, often meaning bigger dividends. Stash them in retirement accounts like IRAs or 401(k)s and Uncle Sam will politely wait to tax you until you start withdrawing.
Ultimately, economic fundamentals always beat political spin and market illusions. Wednesday’s GDP figures will likely remind us that the U.S. economy isn’t merely slowing — it’s an out-of-shape jogger. Recognizing this uncomfortable reality isn’t just smart portfolio management. It’s mandatory.
