Economic Outlook

 

On the economic front, employment gains topped 312,000 in December, and unemployment is at a 50-year low of 3.9%. Corporate America is hiring and making money. Wage growth is also seeing upward momentum. In response, one question remains, what will the Fed do with interest rates? The Fed tightening cycle began in late 2015, and although they have been transparent in their rate moves to help calm the markets, no one knows for sure. Thus far, the equity markets have been wildly volatile in response to the Fed hikes coupled with our ongoing trade war with China. At the same time, the 10- year treasury yields have come down, resulting in a flattening of the yield curve (the difference between 2-year and 10-year treasury spreads). Fixed term borrowing costs for commercial real estate investors are based off the 10-year treasury rates--which is keeping rates low on apartment loans and fueling continued demand.

 

 

President Trump just announced a "short-term" re-opening of the government, putting a temporary halt to the longest government shutdown in history. Only time will tell whether this is a temporary fix or a resolution that can be reached. Rating agency Standard and Poor's estimates that the U.S. economy loses more than $1.2 billion for every week the government is closed.