NEW YORK CITY-The last time Deloitte held a Distressed Debt & Assets Symposium here was in January 2010. The skies were overcast and the temperature was in the low 20s, whereas Tuesday’s edition of the symposium took place on a sunny, spring-like day. It was an apt metaphor for the difference 18 months have made in the capital markets and the overall economic outlook, said Guy Langford, leader of Deloitte’s distressed debt and assets services practices. Yet Langford and other panelists cautioned that sunny skies could still cloud over again.

“As good as the capital markets feel right now, clearly it’s a very fragile environment,” said David Ying, senior managing partner at Evercore Partners and a panelist in the “At the Crossroads” discussion moderated by Langford. With caveats such as these offered by the symposium’s experts, Langford summed up the wisdom to investors as follows: “Ready, set, proceed with caution.”

As a sign of how far things have come, DebtX managing director Karen Johnson noted that we’re beginning to see sales of performing loans now. Johnson observed that both the market and pricing have improved, with the bid/ask spread converging.

However, Deloitte’s Sabaeth Siddique, who also took the podium for a discussion of regulatory issues, pointed out that there’s a healthy inflow of capital targeted toward big names and top-tier markets. “That’s not where the problems are,” said Siddique, director of the firm’s governance, regulatory and risk strategies practice. He said the capital spillover into smaller markets needs to happen faster. That being said, Michael Levy, global CFO of real estate investing at Morgan Stanley, predicted it won’t take “a leap of faith” to assume that a year from now, panelists at such a symposium would be talking about just such a spillover.

Levy also weighed in on the progress special servicers have made in getting a handle on the volume of distress. “Time has been their friend,” Levy said, observing that the servicers have brought clarity to valuations. But he added that valuation “was a guess a year ago, and it remains one today.”

In his discussion of the regulatory environment, Siddique said that the FDIC and other agencies were likely to turn up the pressure on banks to stop looking at one-off sales of distressed assets and debt and turn instead to portfolio-level solutions. That’ll mean more bulk sales, in both the residential and commercial mortgage sectors.

On the subject of commercial mortgages, Siddique saw the 5% risk-retention rule of the Dodd-Frank regime as an obstacle to growth in the resurgent CMBS market. He advised industry members to take an active role in shaping the risk-retention rulemaking.

It’s not yet clear whether federal regulators will take a one-size-fits-all approach, and it’s also not known whether the 5% rule applies to an entire securitization or strictly to the interest-only piece. But if the industry doesn’t do its part to steer the conversation, federal regulators will take the most conservative approach possible to the new rules, Siddique warned.

The symposium, which concluded with a series of breakout sessions, began with a keynote discussion featuring former General Growth Properties CEO Adam Metz and BNP Paribas Asset Management’s Martin Fridson, moderated by Bloomberg Television’s Pimm Fox. Now a senior advisor with TPG Capital, Metz said that notwithstanding a lot of hand-wringing, “It doesn’t feel to me that we’re back at a bubble level” with regard to credit. And Fridson, global credit strategist at BNP Paribas, said he didn’t see the cessation of quantitative easing as the end of the world. He pointed out that even after a recent slowdown in US GDP growth, economists maintained the same 3% growth projection for 2011 as they had made earlier.