Halftime Adjustments

Markets Reprice as Outlook Shifts

The first half of 2026 brought a dramatic shift in capital markets as resilient labor conditions, persistent inflation, and escalating geopolitical tensions reshaped the economic outlook. Markets entered the year expecting Federal Reserve interest rate cuts, but renewed inflationary pressures – driven in part by conflict in the Middle East and higher energy prices – prompted a meaningful repricing of monetary policy expectations, with markets now pricing in the possibility of a rate hike.

As the second half of the year begins, investors are navigating a more hawkish Federal Reserve, heightened market volatility, and continued uncertainty surrounding inflation, energy markets, and global policy developments. Understanding how these forces are influencing fixed income and commercial real estate capital markets is critical for borrowers and investors alike.

What’s Inside the Report:

• Geopolitical Risks and Energy Markets, including how the U.S.-Iran conflict reshaped inflation expectations and Treasury market volatility.
• Labor Market Trends, as employment remains resilient while concerns shift back toward inflation.
• Federal Reserve Monetary Policy, including the transition to Chair Kevin Warsh and the market’s shift from anticipating rate cuts to pricing in potential hikes.
• Treasury Market Volatility, and what changing rate expectations mean for borrowers and financing strategies.
• Agency CMBS Resilience, including resilient credit spreads, strong investor demand, and supportive supply-demand dynamics.

Looking Ahead:

The report explores the key themes expected to shape capital markets through the remainder of 2026, including:

• The evolving outlook for inflation, interest rates, and Federal Reserve monetary policy.
• Ongoing geopolitical risks and their potential impact on energy markets and market volatility.
• Agency CMBS performance, investor demand, and commercial real estate financing conditions.
• Market conditions for borrowers, lenders, and investors navigating an uncertain environment.

Download the full report to gain insights into the  capital market trends expected to shape commercial real estate finance during the second half of 2026.