Good morning, readers. I’m Phil Rosen, reporting from New York City.
The bank turmoil we saw in March feels like some time ago, but top strategists are warning that more consequences are still ahead.
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1. Regional banks’ recent troubles are just the beginning — at least, that’s what a chorus of Wall Street folks have been saying this week.
JPMorgan Asset Management’s Jonathan Liang said Wednesday on Bloomberg that smaller banks now face an increased risk of credit losses because of their heightened exposure to the commercial real estate debt.
Nearly $450 billion in commercial mortgages are due to mature this year, with final payments due in the coming months for many property owners, according to Trepp data cited by JPMorgan.
“We think the story in banking is not over yet,” Liang said.
And Goldman Sachs’ global head of real estate client solutions, Jeffery Fine, recently said the commercial real estate market is in the middle of a “perfect storm” of higher rates, tight credit, and fast-maturing debt.
The market faces a “big rightsizing” that must be confronted, Fine said on Goldmans’ podcast, and he anticipates a drop in valuations in older properties and office buildings.
Remember, the Fed’s nine consecutive interest rate hikes have made borrowing more costly, and commercial property owners will likely be trying to refinance their loans at higher rates than when they originally took them out.
On top of that, many experts say that a credit crunch has begun, and loans are going to be generally harder to come by.
The Goldman strategist said securing commercial real estate loans now is “almost impossible” since financing has just about shut down.
“Over time there’s going to have to be a very organized public and private partnership to figure out a careful unwind of this current dynamic,” he added. “Otherwise, we have a very messy situation on our hands.”
What’s your outlook for the commercial real estate sector in the next 6 months? Tweet me (@philrosenn) or email me (prosen@insider.com) to let me know.
In other news:
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2. US stock futures fall early Thursday, with corporate earnings still in focus. Later this morning, investors will also be keeping an eye on data on jobless claims and existing home sales. Here are the latest market moves.
3. On the docket: American Express, Fifth Third, and KeyCorp, all reporting.
4. The rest of 2023 is the “best period” for stocks in a 12-month span. Nationwide’s Mark Hackett said stocks could be fairly calm moving forward, creating an opportunity ahead of next year’s elections. He recommended what to buy while the good times roll.
5. Germany is looking to cut its reliance on China with a new $2.2 billion commodities fund. Since Russia invaded Ukraine, European Union nations have looked to ramp up domestic production and refining for raw materials. Here’s what to know.
6. Wall Street has high hopes for Netflix. The streaming giant is preparing to crack down on password sharing in the US — and Bank of America anticipates that to drive big upside for revenue and subscriber growth.
7. US foreclosure filings have increased for 23 consecutive months. In the first quarter, they are up 22% compared to a year ago, and repossessions just hit their highest level in three years.
8. This real estate investor commands a 311-unit portfolio. She explained a recession-proof strategy that she’s using to all but guarantee she receives market-value rent payments. Get the full details.
9. Meet the Fidelity fund manager who’s beaten 93% of competition in the last five years. He shared how he consistently delivers upside while avoiding painful sell-offs — and broke down how he finds “mispriced growth” stocks hiding in the market.
Markets Insider
10. Tesla stock slides 8% in premarket trading as Elon Musk’s price cuts eat into quarterly profits. The EV maker met analysts’ first-quarter revenue targets, but reported slimmer profit margins. Here’s the latest.
Curated by Phil Rosen in New York. Feedback or tips? Tweet @philrosenn or email prosen@insider.com.
Edited by Max Adams (@maxradams) in New York and Hallam Bullock (@hallam_bullock) in London.