Five out of the last six times there's been an inverted yield curve, a recession has followed.

But the team of analysts at Thirty Capital thinks that if a recession does occur, it won't happen in the very near future.

Says Thirty Capital Analyst Bryan Kern: "The Fed has only hiked 25 bps, so they haven't really done anything yet, outside of providing commentary that's sent the market into a tailspin."

Talk of a recession is premature, overblown

Bryan does note that there are some signs of slowing growth, particularly in retail sales. The question now is if the U.S. does have a recession, when will it happen?

He thinks if a recession does occur it will be in 2023, and it won't be severe. Of course, no one can predict the future, but Bryan believes the current narrative about an impending recession is premature and overblown.

He adds it's important for the markets to focus on what's at hand right now - high inflation and a war in Ukraine.

80 percent chance of a half point hike

The markets are expecting a full half point increase announcement at the Fed's meeting next month.

Analyst Jay Saunders points out that there is a fairly significant inversion in the SOFR swap curve, with the three-year point being the highest. He says that short-term rates will head north of one percent in the next few months. Listen to the full episode for Jay's details of SOFR rates and what's happening with SOFR in the episode.

Caps much more expensive

Despite the volatility, commercial real estate borrowers are busy and completed a lot of deals ahead of the end of the first quarter. Jay says borrowers need to think about how they will purchase a cap for any upcoming deals and how they intend to address their caps, given that they can be so expensive.

Jay says the next thing the markets can watch out for is the Fed and its balance sheet. "I think the Fed would like to see long-term rates quite a bit higher than they are. They don't like inverted yield curves. And the way to do that is to start accelerating how quickly they unwind their balance sheet."

In the past, people could go for a five- or seven-year loan. But this flatness wipes all that out.

Forward Fed funds predicting high rates

Analyst Jason Kelley says that forward Fed funds are predicting much higher rates, up to three percent next year. His analysis is that the market believes the Fed is going to overdo it and "just blow through, then we'll have some kind of recession and rates will come back down."

He says Thirty Capital is looking at putting some hedges on internally. They are going to skip the '23 and '24 tranche and lock in some of the '25 and '26 rates.

Jason gives an analysis of the current market conditions and their impact on the commercial real estate market.

Listen to the full episode for the team's full analysis on market activity and how this impacts commercial real estate investors.