With 2024 around the corner, there is no better time to take stock of the key themes that tie together global markets and shape our outlook for the coming year.

1. Searching for peak rates

The macro context for real estate remains unsettled. Earlier in 2023, rates exhibited high volatility, but little overall trend. They moved mostly sideways or only gradually upward. This was enabled by cooling inflation and expectations that central banks were reaching the end of their tightening cycles. But more recently there has been a renewed surge in interest rates in several key markets. Corporate bond yields, which we use as a building block for our pricing models, have taken a clear turn upwards, reaching or surpassing levels last seen in late 2022 (see chart 1). The recent upward trend in interest rates could prove short-lived. But history suggests that whenever there is a big increase in rates, there is an increased risk that “something breaks”—whether that be a financial institution, a part of the capital markets or the like. Also, extended periods of yield curve inversion, as we have seen in 2023, tend to presage economic downturns; if a recession does arrive, it would only add to the challenges we have faced so far. Both factors should raise the alert level for the global economy in 2024.

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