Just a few months ago there was an overwhelmingly bearish consensus from investors. Now the bears are doing some soul-searching as economic data is coming in better than expected.
Investors can feel decidedly and uncomfortably under-allocated at times like this, and they're jumping into the market. What's more megatrends like artificial intelligence is pushing up stocks like Nvidia Corp. (NVDA) to extremes. Major indexes were all up over 1% on Thursday and the S&P 500 was up six days in a row, the longest winning streak since late 2021. While there is some unease around the Fed’s “hawkish pause,” it clearly didn’t hurt the markets' performance. That's a sign equity markets either A) don’t believe the Fed will hike two more times this year, or B) that recession fears might be overblown.
Regardless of the direction of today’s market, there are still pockets of significant weakness which continue to see the impacts of high interest rates. We’ve been talking about the commercial real estate (CRE) market all week and we even heard Jerome Powell admit that some banks are "in trouble" with their commercial real estate holdings. It may not be a broad thread to the entire market, but between small banks and real estate stocks, we could see plenty of downside.
Shah Gilani looked at the $1.5 trillion in commercial loans coming due and dived right in. There are two ways this can go: Either landlords have to lock in new higher rates and try to push that onto tenants who likely can’t afford it... or default and leave banks and landlords holding the bag. Either way that spells trouble. This is a $21 trillion market in free fall and that can mean big opportunity for well-prepared investors. Have a look at what Shah's seeing now .