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Black Swan Events—Could they Impact Fed Cuts and CRE?
On September 19, the Federal Reserve lowered the Effective Federal Funds Rate by 50 basis points.
Then, economic concerns began. According to Marcus & Millichaps’ recent video, “Will Black Swan Events Derail the Fed and CRE Outlook?” here’s what happened:
- Hurricane Helene made landfall in Florida, cutting a swath of destruction. “The cost of Hurricane Helene in both terms of lives lost and economic impact will likely be one of the greatest on record,” said John Chang, Marcus & Millichap’s Senior Vice President, National Director, Research and Advisory Services. Helene was followed a little more than two weeks later by Hurricane Milton, which also hit Florida and was a devastating storm, with economic impacts likely to be in the billions of dollars.
- Israeli ground forces entered Lebanon, which generated a response from Iran. “One major concern stemming from a Middle East military escalation is the upward pressure it puts on oil prices,” Chang said. Elevated oil prices boost inflation and can depress economic growth.
- Dockworkers went on strike at East Coast and Gulf Coast ports. The International Longshoreman’s Association (ILA) called for its workers to walk off the job on Oct. 1. The strike was of short duration, with the U.S. Maritime Alliance (USMX) agreeing (in principle) to increase worker pay and decrease automation. While the strike only lasted a handful of days, it created a backlog of traffic. Furthermore, “it takes five to seven days to unravel the effects of just one day of foreclosure,” Chang said.
In his discussion, Chang focused on the strike, pointing out that experts had predicted a short strike (which happened), meaning a limited impact on the economy—especially in real estate. Specifically, a short-term strike wouldn’t likely make much difference to real estate investment or even port-proximate real estate.
Furthermore, “real estate operates on a long-term investment cycle,” Chang said. As such, the port shutdown would be just a blip from a long-term perspective. “It’ll likely have a minimal impact on real estate over the long term,” Chang added.
- ◦Economy
- ◦Policy/Gov't
