Cap rates may compress during the latter half of this year, despite rising Treasury yields, as the economic recovery continues to follow a K-shaped trajectory.
A recent analysis from MetLife Investment Management notes that the US five-year inflation breakeven rate – which forecasts where the market believes inflation will be in five years – has reached its highest point (2.45%) since the aftermath of the Great Recession. This has been primarily stoked by an influx of financial stimulus as the broader economy recovers post-COVID.
Inflation will likely increase this year, according to MetLife analysts, though it will likely be more "transitory" and reflective of price volatility last year.
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