Financial powerhouse Morgan Stanley grabbed everyone’s attention this week when it unfurled its “5 Red Flags” over the state of the market and economy. These flags related to: the inverted yield curve showing short-term rates as higher than long-term rates; anticipated drop in Earnings Per Share (EPS) of the US500; The Purchasing Managers’ Index (PMI) falling below 50; unemployment below average; and worsening state of lending standards.
When the yield curve is in this inverted position it proves to be a forecast of the recession that is extremely accurate. When these indicators start flashing red – historically, the market drops 4.5% over the coming 6 months. In the 90s, the yield curve hit a minus that coincided with a drop in the stock market. The same happened at the beginning of 2000, 2007, and 2008 the market collapsed, and again more recently in 2020 following the Covid pandemic.
If history is repeating, we might see a collapse in the market very soon. The good news, this could be the time for investors to hedge as gold and silver may well go through the roof, along with oil.
According to Bill Rudin, co-chairman and CEO of one of New York’s largest privately owned real estate companies, Rudin Management Co., commercial real estate faces “significant storm clouds” ahead. Rudin expressed concerns about the state of the regional bank sector and the overall condition of commercial real estate. He also mentioned the pressure on regional banks and the potential challenges in the industry.
These warnings highlight potential risks and challenges in the commercial real estate market, which may require careful consideration and strategic planning for investors, developers, and other stakeholders involved in the industry.
If you’re investing or developing in real estate it will be wise to be careful as real estate is not a liquid asset and securing a mortgage and other lending is a struggle at the moment. Thus, we should perhaps add one more red flag here, at least for the short term as in the long term real estate has always been an incredible opportunity for investments.
