Recovery Shape Speculation Abounds

This week saw Blackstone CEO Stephen Schwarzman forecast a “big V” recovery this summer, easily the best case scenario among the possibilities. Meanwhile, the IMF downgraded its forecast to a 4.9% global contraction in GDP this year, with the U.S. at an 8% contraction. They lowered their 2021 positive global GDP estimate to 5.4%. Schwarzman is optimistic as he predicts treatments or a vaccine will emerge soon, while most predictions are for a longer wait. This week’s data points should offer some clarity. After the recent bigger than expected increase in the May jobs report: will the trend continue on Thursday (Durable Goods) and Friday (consumer spending)? Both of those reports set record lows in April, and positive increases in May could auger well for the recovery. The data will be critical as Congress and the administration contemplate a possible 4th Covid stimulus bill.

Upcoming “cliff” dates to watch:

  • July 31 – end of supplemented unemployment insurance (as vast numbers are still unemployed, the end of these benefits could hinder the recovery).
  • Oct 1 – The first day airlines and other major employers are allowed to lay off employees per the federal assistance guidelines and possible government shutdown.

Capital Markets: The secondary markets (CMBS and CLO) continue to function as pools with the right product type mix are being well received. Spreads are tightening in the fixed rate debt markets. CMBS will compete for strong properties with interest only and sub 4% rates. Bridge lending is coming back with 75% LTC for well underwritten multifamily loans being offered. Stay tuned. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners

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