Two-Minute Market Focus: The Commercial Real Estate Comeback

Key Takeaways

• Markets have remained broadly supported over the past 90 days, led by international stocks and small-cap equities, with gains in the S&P 500 and commodities as well.

• The bond market has stayed nearly flat despite Treasury and Fed-related developments that could influence yields.

• Commercial real estate is showing signs of improvement, with office real estate investment trusts (REITs) up nearly 20% this year and easing concerns about pressure on banks and the broader economy.

Markets Remain Well Supported

Over the past 90 days, equities have remained resilient, with international stocks continuing to lead the market and small-cap equities also posting strong gains. The S&P 500 has moved higher as well, while commodities have rebounded after a sharp decline earlier in the summer.

The Bond Market Remains an Important Area to Monitor

Despite developments that could create upward pressure on yields, the bond market has remained nearly flat over the past 90 days. Potential Treasury tools, including a return to Operation Twist or the use of the Treasury General Account to buy Treasuries, may influence the yield curve, but yields have not appeared to move out of control.

Commercial Real Estate Shows Signs of Improvement

Commercial real estate, particularly public office REITs, has shown notable improvement this year, with office REITs up nearly 20% after significant declines in 2023. This rebound suggests that some of the downside in real estate may have already been worked through, easing concerns about potential losses in bank and asset manager portfolios and supporting the view that the economy remains in an economic growth cycle.

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