As Pieces of the Foundation Economic Foundation Get Pulled Out, US Equities and CRE Still Defying Gravity
Since the War in Iran began in late February, the US economy and the bond markets have taken some stiff uppercuts.
Oil prices have nearly doubled, leading to a big spike at the gas pump and a threat of higher inflation numbers until the fighting in the Middle East ends.
US debt exceeded GDP for the first time in America’s history. That same GDP rose only 2.0% in Q1 2026, missing analyst expectations.
Bond yields have risen considerably, with the yield on the 10-year sitting at 4.42% this week, up from 3.95% before the start of the war. At the same time, risk premiums have inched up.
US consumer confidence remains underwhelming and the Fed seems in no hurry to cut rates.
Capital spending by US tech funds is insatiable, threatening to wipe out big chunks of profits for those firms in 2027.
Equity and CRE Markets Shrug Off War, Oil Prices, Rising Bond Yields
Like the top pieces of a game of Jenga, the US equity markets and the CRE market sit atop the tower while pieces of the foundation – oil prices, consumer confidence, interest rates – continue to be pulled out from underneath.
On Tuesday, the S&P 500 and Nasdaq hit new all-times highs, something that recently seems to happen every other day. Meanwhile, chip makers like AMD, Micron, and Sandisk have reached nose-bleed territory as they remain big beneficiaries of the enormous Mag 7 spend.
The commercial real estate market similarly continues to defy gravity.
This week, LightBox released its monthly LightBox Commercial Real Estate Activity Index. That index itself hit another post 2022 high, coming in at 125.1.
The index is made up of three pillars. The LightBox network sees tens of thousands of environmental due diligence requests, appraisals procured, and properties listed for sale each month. Together, these have been an extremely reliable indicator as to whether or not the CRE market is slowing, leveling, or accelerating.
As forward indicators go, there is a strong one as requests for Phase 1’s and appraisals often front run lending and the data from bank call reports by several months as indicators of CRE activity. Usually by the time banks report, the inflection point has already been reached.
Back to the Data
Back to the data itself. For the second time in a year, the commercial real estate markets have defied conventional wisdom.
In April 2025, the common narrative – one that we agreed with at the time – was that tariffs would take the wind out of a fledgling CRE recovery. That tariffs would drive inflation, which would drive rates higher, which would slow the pace of buying and lending on CRE in the US.
In March 2026, that same narrative emerged. Higher oil prices would beget higher CPI and interest rates which would pull the rug out of CRE.
Some of that was true – the war did lead to higher oil prices and interest rates. But the slowdown in commercial real estate velocity has yet to take root. Now that we are nearly 10 weeks into the war, one has to question if a slowdown will every come.
Lending, Liquidity Still Plentiful
On a separate high note, this week’s Commercial Mortgage Alert revealed that CRE CLO issuance is currently outpacing CMBS issuance. Why is that important?
Most CRE CLOs are issued by private equity lenders making, warehousing, and securitizing CRE loans. As we know the PE private loan market has been under scrutiny, as market watchers believe PE firms became quite lax in their lending in that segment in recent years.
There was some concern that – because of guilt by association or simply because banks were pulling back on warehouse lines – that the CRE CLO market could get nicked. Thus far, that hasn’t been the case.
Similarly, every week brings new headlines of developers lining up construction financing for new projects or for office to resi conversions. All of that is more evidence of a fully functioning market.
Nothing Lasts Forever
Certainly nothing lasts forever, as US stocks are at levels that seem rich. So a reset could be coming. For now, however, it has been a great ride for equities and for CRE. Let’s hope the music doesn’t stop.
