As February 2018 gets its start, the world equity markets are producing headlines like "volatility spike" and "mini-crash." Stock market volatility, which was extremely low throughout 2017, rose dramatically with a global decline of 2% to 5% in various equity markets. The resulting flight to safety moved sovereign rates down slightly after a long run up.
What does this shocking outcome mean for private commercial real estate? –
Stock and bond volatility sometimes reflect major changes in fundamental pricing and on some occasions adjustments that last for years. Many times, however, short-term trends in these freely traded markets are reversed without a hint of change in private markets. Which event is the current case? Many pundits will answer with full conviction but only time will tell.
During 2008, equity markets moved violently in response to the credit crisis and all asset values fell over the coming year, taking several years to recover. During 2013, US Treasury rates spiked up 100 basis points over a month's time, only to quickly recede back to the beginning rates over the following months.