Markets make shock move downwards, despite rate increases on horizon

<p>The markets shocked everyone last week, with rates falling instead of increasing as expected after the Fed signaled at least three interest rate hikes in 2022.</p> <p>There’ll potentially be another three increases in 2022.</p> <p>“The market isn’t buying that the Fed is going to be as hawkish as they think,” observes Thirty Capital CEO Rob Finlay.</p> <p>Analyst Bryan Kern says that anxiety around the Omicron variant sparked panic buying, hence no increase in rates after the Fed statement.</p> <h1>Worries over potential shutdowns, struggling economy</h1> <p>Concerns about potential shutdowns are also playing a role, with people asking what the Fed will do if the economy really starts to struggle. With inflation being high, experts are wondering if the government will start piping more money back into the economy.</p> <p>“There’s definitely a lot of uncertainty right now,” says Bryan.</p> <p>The Fed is in a tough spot and COVID-19 has pretty well been in control of the economy for quite some time now. The Ten-year is probably looking at around a high of 1.75, with a continued flattening of the yield curve.</p> <h1>What’s the impact on commercial real estate investors?</h1> <p>For commercial real estate investors, Rob points at the craziness with SOFR, BSBY, and long-term bonds. Lots of folks are still trying to figure out where they are going, and how to structure their assets and liabilities.</p> <p>Explains Analyst Jay Saunders: “There’s a tradeoff between the simplicity of a term-SOFA rate versus the liquidity in a daily, simple average.</p> <p>“But certainly, from what we're hearing, most folks that had LIBOR . . . most are going to a one-month term SOFR.”</p> <p>Rob expects the market to really make some wild swings because everyone is trying to figure out what to do and doesn’t want to be the first one out the gate.</p> <p>“There was an article recently in Commercial Mortgage Alert, which talked about how difficult it's going to be for a lot of these short-term lenders to all come to a consensus within t