This may not be a phenomenon exclusive to Donald Trump, but data collected over the past 70-plus years shows that whenever a new president enters the Oval Office, a recession tends to follow within the first year of his administration, according to Victor Calanog, chief economist and senior vice president of research with New York City-based research firm Reis Inc. This is often due to the eagerness to implement fiscal policy changes in a hurried fashion, using “rather blunt instruments.” Given that the U.S. economic growth is currently far from robust and that Trump ran on promises of a number of economic changes—renegotiated trade deals, lower taxes and the like—the new administration will have to be extremely careful to avoid inadvertently bringing on a recession. “If the economic environment is fragile, which it is today, it may not take much to push our economy into a downturn,” Calanog said during a third quarter briefing on the state of the market. “President Trump has his work cut out from him.”

As was made clear earlier this year, the CMBS markets don’t respond well to any perception of uncertainty in the general economy. At this point, it’s anyone’s guess what Trump’s economic policies may look like, says Greg MacKinnon, director of research with the Pension Real Estate Association (PREA). And that means more volatility is likely to be expected. “It’s really going to take a while to see how things will actually unfold,” MacKinnon notes. “In the short term, of course, that leads to uncertainty in the capital markets and I would not be surprised to see periods of volatility over the next couple of months as people come to grips with the election results. In the short term, capital market volatility could lead to a drop off in CMBS issuance from what it otherwise would have been through the end of the year.”

If the capital markets do experience a shock to the system, the difficulty of obtaining construction financing coupled with a muddy economic outlook may push some developers to abandon plans for new projects, MacKinnon adds.

While some investors may take a wait-and-see approach to betting their money on U.S. commercial real estate assets in the short term given the uncertainty surrounding U.S. economic policy under the new President Elect, “capital formation globally continues to grow and increase allocations to real estate,” according to Byron Carlock, real estate practice leader with consulting firm PwC, who is currently in London for an investment conference. Overall, “we will continue to be viewed as a safe haven and a popular investment destination,” he says. In fact, some foreign investors may expedite deals stateside in the coming months to protect against the possibility of potential barriers to foreign investment in the future, given all the anti-globalization talk during Trump’s campaign, noted MacKinnon. The long-term impact on global capital flows into U.S. real estate won’t be apparent until next year, however, according to Raymond G. Torto, lecturer with the Harvard Graduate School of Design and retired chief economist with real estate services firm CBRE. Post-Brexit “everybody is cautions, moving slowly and not in a knee-jerk manner,” he writes. “Most 2016 strategies are being implemented now. The election will affect 2017 strategies.”

If Trump does start to enact some of the anti-trade policies that he has talked about during the campaign, that would likely lead to higher inflation and, by extension, to higher cap rates on commercial properties, notes MacKinnon. The higher inflation will “likely lead to a steepening of the yield curve as long-term rates incorporate higher inflation expectations. Further, expectations of higher budget deficits going forward will tend to increase real long-term U.S. bond yields. Combined, you would then see a further steepening of the yield curve, which could drive cap rates higher—without a concomitant increase in economic activity this could be a major negative for property values,” he says.

Over the past year or two, real estate investors, including those from overseas, have shown a bigger appetite for risk by entering secondary and tertiary markets. Depending on whether the new administration will soften its stance on trade policies, immigration and other global issues once in office, there might be a pullback from those markets back to first tier, coastal cities like New York, according to Sam Chandan, Larry and Klara Silverstein chair in real estate and associate dean of the Shack Institute of Real Estate at New York University. If the anti-globalization stance doesn’t soften, it will result in much greater risk aversion on the part of investors and a subsequent desire to stay in markets perceived as safe and highly liquid, he notes.

Ultimately, the immediate impact of Trump’s presidency on the market is uncertainty—about his policy decisions, about his impact on the economy and about how he might influence the Federal Reserve, industry sources say. There is not enough information currently available to drive changes in investment strategy, according to Torto. “The Trump victory was unexpected and will lead to two immediate reactions among financial securities. One, portfolios will be adjusted to meet reality today—Trump’s win,” he writes. “And two, the Trump presidency has a high level of uncertainty as policies under Trump are an unknown. These factors do not impact commercial real estate, but do impact economic growth therefore commercial real estate indirectly. At the moment, we do not know if the impact will be big or small. And whether it will be… worth watching.”

According to Chandan, “I think the markets understand that during the lead-up to the election the rhetoric and the policy proposals tend to be more extreme, but the Presidents Elect historically have historically moderated their position once they are not having to mobilize their base. Part of the challenge for us is the finer points of [Trump’s] policies are not entirely clear. Overall, I think investors will be looking for a shift in language to see if some of the policy proposals that were viewed as more extreme are softened in a way that would be supportive of trade and continued capital flows."