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No one ever asks me my opinion on market conditions, but if they did, I’d tell them this: I prefer a good, old-fashioned valuation-driven market. Right now, that’s not what we have. Instead, we’re watching headlines dictate price movements in a way that makes even the most seasoned investors shake their heads. Tariffs? The market drops. Some relief from tariffs? The market rallies. Layoffs, Dogecoin drama, economic uncertainty—each day brings a new wave of reactions that make it increasingly difficult to separate noise from reality.

This version of Donald Trump disappointed Wall Street. This isn’t the Trump they were expecting. The first time around, he was uncertain, relying on traditional politicians and taking cues from the stock market itself. If stocks went up, he stayed the course. If they fell, he made changes fast. Tariffs were a negotiating tool—threats, not action. This time, he’s got a clear plan, and he’s sticking to it. Until overwhelming evidence proves his approach isn’t working, he’s not backing down.

Historically, tariffs bring inflation, they drive up prices, and more often than not, they don’t deliver their intended results. There’s a bell curve of possible outcomes here. On one end is stagflation, global tension, and economic stress. On the other, tariffs work as intended, manufacturing comes back home, and we witness a mid-sized business renaissance unlike anything seen since World War II. Reality? It’ll likely land somewhere in the middle. But we’ve never seen this exact combination before—government downsizing, tariff imposition, and trade conflicts all unfolding simultaneously.

What I do know is that we’re positioned well. We’ve got banks. We’ve got lenders. We’ve focused on a margin of safety, dividends, and asset growth. We’re holding solid, financially strong companies trading at discounted valuations that return cash to us. When uncertainty rules the day, that’s the best place to be.

The Economy: Hard vs. Soft Data

Hard economic data—jobs, wages—is strong. There’s no denying that. But soft data? It’s a mess. The University of Michigan consumer sentiment report looks like something out of a depression. Inflation expectations just had their biggest jump since 1993. The National Federation of Independent Business (NFIB) Uncertainty Index is at its highest level since 1975. Think about that for a second—since 1975, we’ve had Watergate, Volcker’s 20% interest rates, the Reagan boom, the savings and loan crisis, the dot-com bubble, 9/11, two Gulf Wars, the Great Financial Crisis, and COVID. Yet businesses today are more uncertain than they’ve been in 49 years.

Two weeks ago, businesses were planning capital expenditures for 2025. Now? Not so much. The latest surveys from the Dallas Fed, Philly Fed, and Kansas City Fed all tell the same story—business owners are seeing inflation pressures, potential tariff impacts, and growing uncertainty, so they’re pulling back. Hiring? On hold. Expansion? Let’s wait and see.

And then there’s the government layoffs. Look, the government does need to shrink—no doubt about that. But every government job lost takes down contractors, suppliers, and consumers who drive spending. Small business owners feel this firsthand because it’s their customers who are affected.

Inflation, Spending, and Credit Markets

Inflation numbers last week were decent, but we’re not under 2% yet. Prices paid for raw materials are rising across multiple Fed surveys, which means inflation is likely to stay sticky. Consumer inflation expectations just had their biggest jump since the first year of the Clinton presidency.

Even with all this uncertainty, business sentiment today is better than it was last year. The worst of the uncertainty was last summer, when the election outcome was a coin flip. Businesses didn’t favor a continuation of Biden’s policies, but they liked the alternative. Now, they’re dealing with a known quantity in Trump, but uncertainty about how his policies will affect them remains.

Consumer spending, however, is flashing early warning signs. Credit spreads aren’t in panic mode yet, but they’re widening. The 10-year average for high-yield spreads is 4.96%. If we hit two standard deviations above that, it’s time to load up on banks and lenders. Right now, we’re at 3.4%, up from 2.6%. Not red alert territory, but the trend is moving in that direction.

Meanwhile, debit card transactions are plunging. Restaurant bookings are down, despite food inflation not being a major factor. Rail traffic is down sharply. Weekly oil demand and gasoline usage are falling. These are the kinds of indicators that matter far more than whatever headline Wall Street is reacting to today.

Prospects for U.S. Commercial Real Estate in 2025

Looking ahead, the commercial real estate (CRE) market in 2025 is shaping up to be a mixed bag. Some sectors will see resilience, others will continue struggling, and the impact of higher interest rates and structural shifts in demand will dictate outcomes.\

Office: A Slow Burn Recovery

Office properties are still in trouble. Vacancy rates in key cities remain above 20%. The return-to-office movement has stalled. High-end spaces in top-tier locations? Those are holding up. But older buildings, particularly those with significant debt? They’re struggling. Distressed opportunities will emerge, but recovery in this sector will be slow and selective.

Industrial & Logistics: Still Strong, but Growth is Slowing

Industrial has been the standout performer, thanks to e-commerce and supply chain shifts. Demand is still high, but rent growth will likely slow in 2025 as more supply comes online. Companies reshoring their manufacturing will keep demand healthy in logistics hubs.

Retail: A Mixed Bag

Experiential and necessity-based retail is holding up well. Grocery-anchored centers and entertainment-driven retail are thriving, while traditional malls continue to suffer. Secondary markets are at higher risk due to weaker economic conditions and reduced consumer spending.

Multifamily: Still a Bright Spot, but Watch the Supply Surge

Multifamily remains attractive, but rent growth is moderating. Increased supply in some markets, particularly in the Sun Belt, could create short-term pressure. However, affordability issues in the housing market will keep rental demand steady.

Hospitality: Travel is Saving the Sector

Leisure travel remains strong, while business travel is still lagging. Resort properties and vacation rentals are booming, but urban hotels reliant on corporate travel are struggling to catch up.

Alright, folks. That’s it for now. We’ve got some traveling ahead—houses going up for sale, closings, and a road trip that takes us from Florida to Texas and eventually to North Carolina. I love Rockport, Texas. It’s a cool little town. If all goes smoothly, by this time next week, I’ll be sitting on a porch in Texas, watching the sunset, and sipping something strong. Until then, stay sharp, watch the spreads, and keep your eyes on value. Thanks, everyone.