Market happenings
What are your thoughts on the state of the market from last weeks fomc meeting up through today? Any predictions moving forward?
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Based on the most helpful WSO content, here's what you need to know:
Recent Market Happenings:
Fed's Pause Button (6/15/2023):
FOMC Texas Showdown (6/2/2023):
Market Reactions:
Predictions Moving Forward:
Key Takeaways:
For more detailed insights, you might want to check out the latest threads and discussions on WSO.
Sources: FOMC Texas Showdown | The Daily Peel | 6/2/2023, https://www.wallstreetoasis.com/forum/investment-banking/sept-22-2015-heres-what-happened-in-the-stockbond-markets-last-week?customgpt=1, Money Market Fun | The Daily Peel | 3/27/23, Inflation In Fed Speeches | The Daily Peel | 3/22/22, Fed’s Pause Button | The Daily Peel | 6/15/2023
Not dropping rates .25 was a mistake and we’re seeing the outcome of that the last two days. I’d be extra annoyed if they don’t drop rates next time.
Not a new phenomenon. Markets usually always descend after they start cutting rates. Good part because they always wait until it's too late / obvious. I don't think we'll really see the other side until after the election. My gut says that cap rates remain the same even as rates come down partly because some will underwrite the risk of a recession impacting their top line and partly because cap rates were already artificially low because folks were anticipating rates coming down. I think the market needs to eventually correct itself so that most deals are positive leverage day 1 (that is, after all, the whole point in investing in real estate. The ability to use nice leverage to boost your returns). The way that happens is still unpredictable to me. We know rates should come down at least a bit in the short term which will help, but we don't know what will happen to NOI. Will there be a softer rental market due to a potential economic softness or will it be strong due to supply weaning off? Will OpEx and insurance level out? These things are still unpredictable to me, but I do strongly believe that the market needs to become a positive leverage market in the next year or two. This past years were an anomaly. You used to be able to underwrite negative leverage because there was so much rent growth and as of recently because you could convince yourself that rates are coming down to save you. Once the smoke settles on both of those fronts, why would people buy deals at neutral or negative going-in leverage if they can't sell a story that it's only a temporary blip?
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