In a timely and insightful conversation on the Peachtree Point of View podcast, host Greg Friedman sits down with Mark Zandi, Chief Economist at Moody's, to discuss the current economic landscape and what investors should be watching.
Recession Risks on the Rise
Zandi doesn't mince words about the current economic situation. He notes that the probability of recession has jumped from 15% to 35% in recent months, primarily due to policy decisions – especially the escalating global trade war. While he believes the economy remains"fundamentally sound," Zandi warns that continued policy uncertainty could tip the scales toward recession within weeks.
"If he continues down this path for another couple, three, four weeks, recession will be more likely than not," Zandi cautions about the administration's trade policies.
Interest Rates and Commercial Real Estate
For commercial real estate investors, Zandi offers a sobering perspective on interest rates. Despite the administration's desire for lower rates, he believes the 10-year Treasury yield (around 4.1%) is appropriately priced for a well-functioning economy. Unless we enter a recession, Zandi doesn't foresee significant rate decreases in the near term.
Commercial real estate, which Zandi acknowledges has"been in a recession the last three years," faces continued challenges. While he believes much of the valuation adjustment is complete, a broader economic recession would mean "another leg down in valuations and pricing."
Key Indicators to Watch
For investors trying to gauge recession risks, Zandi offers practical metrics to monitor:
Private Credit Markets
On private credit markets, Zandi noted that private credit has played a critical role in recent years, stepping in to provide capital when banks pulled back, which he believes helped the U.S. avoid a recession. The market has grown rapidly, now estimated at $1.7 trillion and surpassing the high-yield bond market and rivaling the size of the leveraged loan market.
The Bottom Line
Zandi's parting advice? "Buckle up." With policy uncertainty, trade tensions, and shifting consumer sentiment, the economic road ahead promises to be bumpy.
To hear the full conversation and gain deeper insights on navigating these challenging markets, listen to the complete episode of Peachtree Point of View with Mark Zandi on your favorite podcast platform.
Many pivotal moments in Greg Friedman's life occurred against the backdrop of major economic shifts. He graduated college right before the dot-com bubble burst, and coincidentally walked away from an internet company he started at the tail-end of the boom. Just after he founded Peachtree Group, the private equity firm he leads, the Great Recession began, and he and his partners had to shift their business model. Friedman knows first hand the power of pivoting, which he says helped to lead his firm’s success more than 15 years later. Peachtree Group now counts 250 team members across all of its divisions.
Amid a market downturn, the retail space continues to defy inflationary pressures. Retailers seemingly didn’t get the memo of a softened market and are instead poised to continue opening storefronts and leasing space across the US. How can this possibly be? Mortgage Professional America turned to Greg Friedman, founder and CEO of commercial real estate private equity investor and lender Peachtree Group for answers.
After many years focusing on the hospitality sector, Peachtree has recently expanded its investment strategy to other asset classes, transitioning from Peachtree Hotel Group to Peachtree Group. Together with its lending division, Stonehill, the private equity investor and lender is now active across all real estate sectors, including retail—which has been grabbing headlines in the past few years due to the multiple changes it underwent. Commercial Property Executive asked Peachtree Group Founder & CEO Greg Friedman to talk about the opportunities and challenges for investors looking at this constantly evolving asset class. Today, retail seems to be defying inflationary pressures as retailers continue to open storefronts and leasing spaces across the U.S. For more market insights from Peachtree Group CEO Greg Friedman, follow him on LinkedIn.