Stay Opportunistic: Capital Markets Trends and Strategies for 2026

Published: November 21, 2025

For those exploring refinancing, seeking new capital sources, and looking to fuel growth in the year ahead, insights and strategies were under discussion in a recent panel featuring Chatham Financial’s Reuben Daniels, Managing Director, Head of Investment Banking, and Mark Weiss, Managing Partner, Head of Real Estate.

The current market environment, following the most recent Federal Reserve meeting, has placed the US into an early phase of an easing cycle, even if the sustainability of that cycle remains somewhat uncertain. As a result, for the first time in quite a few years, the conversation around headwinds is slowly shifting towards “grinding higher”, commented Daniels.

This view, he explained, reflects gradually improving conditions in both equity and credit markets. Indeed, he reported that equity indices have risen 20-30% since midyear, and high-yield credit spreads have narrowed from roughly 500 basis points (bps) to 250. It all heralds stronger investor sentiment and renewed liquidity.

Despite this optimism, the market faces an unusual set-up: a U-shaped yield curve. Here, explained Daniels, short-term rates are high; two- to three-year yields dip; and long-term rates return to the same level as short-term ones. It means borrowers now face a strategic decision: lock in fixed, long-term financing; or remain in floating-rate structures in anticipation of further cuts. Just to add to the uncertainty, if short rates decline, long rates may rise, steepening the curve. It’s not an easy choice and, it was advised, and thus “careful judgment” should be exercised.

Searching for stability

Credit spreads remain historically tight. Competition, noted Weiss, has intensified as insurance companies, agencies such as Fannie Mae and Freddie Mac, commercial mortgage-backed security (CMBS) conduits, and both large and regional banks, have all re-entered the lending market.

This influx of capital compresses spreads further. Many institutional investors – particularly pension funds and endowments – have found themselves inadvertently overexposed to equities after a prolonged rally. In rebalancing towards fixed income and private credit, they are accepting lower yields in exchange for stability, which, Weiss noted, is keeping demand for credit assets appreciably robust.

Another key factor supporting tight spreads is a “relatively benign default environment”, said Daniels. Corporate defaults have been limited mostly to a few idiosyncratic cases, boosting confidence among lenders. Additionally, real estate valuations have reset – assets once worth $100 are now closer to $60 – which, coupled with improved underwriting standards, makes tighter spreads appear justified.

Continental drifting

Weiss described a “K-shaped” return recovery where A-class buildings are seeing an increase in leasing but B-class buildings are challenging to finance today. Daniels noted that AI-driven demand for data processing has dramatically increased investment in data centres, and this is possibly crowding out more traditional corporate or industrial credits. Office space tells a different story: Class-A properties maintain demand, but B-grade buildings face financing challenges and frequent conversions to residential use.

Though isolated or idiosyncratic defaults may seem unconnected, Daniels cautioned that systemic stress often begins with one-off failures. Fraud or corporate mismanagement can trigger broader contagion if confidence erodes. He also suggested that refinance risk is a growing issue for firms with legacy debt issued at pre-tightening rates, as stricter lending standards and higher costs create capital structure gaps. For Weiss, downgrades, though not yet widespread, could be the next warning sign of mounting market stress.

In Europe, funding costs remain 120–160 bps cheaper than in the US, said Daniels. This is sustaining a financing advantage for companies able to issue or hedge in euros. But he also observed a notable shift in bank lending behaviour. US regional banks now prefer funded loans, deploying capital actively. Meanwhile, European (and Japanese) banks have grown more conservative, the opposite of recent years. This structural change reshapes how corporate borrowers compose their lending syndicates.

For Daniels, the bank market “is quite profoundly different from the way it has been”. He likened its changing nature to the “continual shifting of Earth’s tectonic plates, with the banks always facing pressures that impact how the capital markets are working”.

Funding real estate gorillas

Real estate’s outlook varies sharply across subsectors. “Last-mile” industrial assets (those located close to consumers) still benefit from e-commerce growth but face some overbuilding, noted Weiss. Multifamily housing (residential buildings or complexes) remains resilient amid historically poor ownership affordability, though the supply and demand dynamic is coming back into balance as the economy softens.

Hotels show early signs of weakness as the economy slows. The office sector is polarised – premium properties thrive while B-class assets struggle for financing. Most dramatically, Weiss noted that data centres have become the new “800-pound gorilla” cornerstone of real estate investment. In 2025 alone, Chatham executed more than $125bn of data-centre deals,  with four individual transactions exceeding $10bn each. “But if you have $125bn going towards data centres, that has to be coming away from something else.”

It was noted that massive data-centre projects have driven a parallel boom in interest-rate and currency hedging. Many deals involve forward-starting construction loans, where financing is locked in today for facilities opening two or three years hence.

Borrowers often now pre-hedge base rates for five- to ten-year terms, sometimes matching the 20-year leases they sign with technology tenants. Banks and private lenders alike want exposure to this sector, though banks struggle with the mismatch between long-term leases and short-term funding. Daniels revealed that the most prudent structures fully amortise debt to reduce refinancing and lease-termination risk, which is essentially a return to traditional self-amortising finance.

While this is ongoing, much corporate activity has shifted toward refinancing rather than M&A and expansion. Daniels commented how companies are optimising existing debt structures typically by simplifying pricing grids, improving covenant flexibility, and adjusting maturities. Weiss added that around 85% of real estate financings in recent years have been refinancings. That being said, it was also observed that acquisition pipelines are slowly reopening as lower base rates and tighter spreads serve to compress capitalisation rates. “It's slow and steady, but we’re definitely seeing a pickup in activity on the acquisition and disposition front,” confirmed Daniels.

Hedge expectations

The US dollar’s weakening trend through 2025 has made currency risk a renewed focus, Weiss reported. Real estate investors, particularly in APAC , are paying closer attention to hedging their dollar exposures. He commented that the yen’s depreciation from 100 to 150 per dollar means that even a 50% net operating income (NOI) increase might in practice yield no gain once converted back to dollars.

Real estate investors are now routinely hedging expected equity value three to five years out, topping up coverage as valuations change. Fund managers, mirroring corporates, increasingly offer share-class hedging so that global investors receive returns in their own currencies. The overall trend reported is a convergence between corporate treasury discipline and fund-level currency management.

In a seemingly contradictory easing cycle with an inverted yield curve, companies are adopting more flexible hedging approaches, such as forward-starting caps and collars, to balance downside protection with participation in lower future rates.

“Real estate people are the ultimate optimists,” stated Weiss. “Often, they will look at hedging as a necessary cost of doing business, but don’t ever think it’s going to happen. The flip side is the desire to prepay interest, buying a deep-in-the-money hedge [i.e. with a strike price significantly favourable to the current market price of the underlying asset] which allows them to feel comfortable that their cash flow is going be there to pay off the assets and not have to make a margin call on their investors.”

Backing the right horse

Private credit was a major discussion topic last year but in 2025, that narrative has evolved. Daniels, referencing the classic Star Wars series, dubbed this as the year “The Empire Strikes Back,” with banks reasserting themselves after many years of private-credit dominance. He explained that tighter spreads in the broadly syndicated loan market, along with aggressive bank behaviour on structure and terms, have made bank financing more competitive.

This means large deals increasingly see both private-credit funds and bank syndicates bidding side by side, creating a “dead-heat horse race”. For borrowers, the approach suggested by Daniels is to maintain relationships with both markets to maximise flexibility and negotiating leverage. In other words, “have money on both horses”.

More generally, with market uncertainty seemingly baked in for the longer-term, offering forward-looking advice for issuers and investors seems like a crusade only of the brave. As Daniels commented: “In this environment, one of the key strategies is to prepare for the worst and hope for the best.” As such, he stated that preparation and contingency planning are paramount.

“Even in benign markets, unexpected downgrades or late-stage transaction hurdles can occur. Successful deals in 2025 benefitted from months of advance planning and the ability to pivot among bank, institutional, and structured-finance alternatives,” Daniels noted. With this in mind, he believes that firms should explore “alternative paths” for capital raising, well ahead of maturities – ideally 12-18 months out – to ensure flexibility.

Curiosity and adaptability should also be maintained by market participants. “Catalytic events, such as  acquisitions, restructurings, or shifts in business models,  should trigger fresh thinking about financing structures,” observed Daniels. While additional analysis may seem unnecessary in calm markets, he argued that the payoff comes when volatility resurfaces. “Most of the time that extra work doesn't get used, and that’s a good thing because that meant that the regular path was effective. But in those moments when it’s not, you'll be glad you did the extra work.”

Trying to avoid concentration in a single funding channel was also advocated by Daniels. With bank and private-credit markets both now competing, borrowers should stay active in each. Diversification not only provides fallback options but also enhances negotiating leverage.

On the investor side, Weiss counselled the avoidance overexposure “to any single moment in time”. While some may be lulled into a false sense of security due to a lack of market volatility, for example, he urges all investors not to wait for the moment when it changes to respond. “Let’s talk about legging into trades [taking multiple individual positions to form an overall position] now, so you don’t later expose yourself to enormous exogenous shocks.”

An interesting point

For both Weiss and Daniels, the boundaries between investment-grade and high-yield, secured and unsecured, and public and private markets are blurring. But the advice offered is to begin refinancing discussions well ahead of maturities to maximise options.

Prioritising flexibility over price was also advocated. “In volatile times, covenant relief and term flexibility, for example, can be more valuable than marginal rate savings,” explained Daniels. “And a few extra basis points in cost are often worth the structural freedom gained.”

Investors should also understand that markets can open and close quickly, and that using favourable windows when they appear can prove highly beneficial. Indeed, as his closing remark, Daniels paraphrased The Most Interesting Man in the World character from the long-running US Dos Equis beer advertising campaign, encouraging market participants to “stay opportunistic, my friends”.