LOS ANGELES—With civil unrest still prevalent across ourcountry, business reopening efforts were foiled by violence andcurfews. The overall jobless claims are still staggering, withnearly 2 million filed new claims while the May unemployment rateis 13.3%. Intentions with Beijing persist while Wall Street ismaking gains from its March lows. Some economists are declaringthat the COVID-19 recession is over, but clearly the recovery isonly beginning. Is the worst really behind us or has it yet totruly begin?

In April 2020, the CMBS Delinquency Rate registered at 2.29%,but now in May, the CMBS Delinquency Rate logged its largestincrease since 2009 at 7.15% (a jump of 481 basis points over theApril number). Almost 5% of that number is represented by loansonly in the 30-day delinquent bucket. So optimistically speaking,we can hope that roughly 5% will recover in the next few months andonly 2.15% will remain in severe distress. Realistically, thenumbers could head higher in June considering that about 7.6% ofloans by balance missed the May payment.

We've recently witnessed some great economic data relative towhat we were expecting this week and, historically speaking, thedelinquency rate has in fact followed the unemployment rate almostexactly, but how believable is this v-shaped recovery? The ADP jobsnumber and unemployment rate were below predictions (someeconomists were predicting as high as 8-10 million job losses and19-20% unemployment), but that doesn't mean we're out of the woodsyet. At 40 million unemployment claims over the last 11 weeks,that's a large amount of furloughed people that have to attemptrecovering their former jobs or find new jobs. Stock futures arefiring up with a tremendous rally over the past six weeks, but wehave a long tail coming. Considering consumer spending frombusiness and seniors, we are expecting considerable bumps in theroad over the next 18 months.