Real estate sales transaction activity slowed in the first quarter of 2019, down 11% from 2018, and decreased for every major product type as macroeconomic uncertainty weighs on deal volume.

Much of the uncertainty is reflected in falling interest rates. According to Cushman & Wakefield's latest Equity, Debt & Structured Finance Capital Markets Update, interest rates have fallen during the past month as investors first tried to seek cover from the trade war between the U.S. and China, and more recently on the tariff threats toward Mexico on non-trade-related issues.

Even as the risk of tariffs against Mexico is no longer high, the threat has added an additional level of uncertainty to the markets. Ten-year U.S. Treasuries started May at 2.52% and are currently 2.09%. The rate might test the 2% psychological barrier if there aren't some tariff resolutions soon.

"There was some relief from the markets regarding Mexico, but I think the threat was damaging enough, and investors will need to let the memory pass before the full impact is reversed," said Christopher Moyer, Cushman & Wakefield's managing director of capital markets, equity, debt and structured finance.

Rates were flat on Monday, the first business day after the Trump administration backed off on tariffs on Mexican goods, at least for the moment, compared with the downward trend beforehand.

The consensus on the impact of tariffs on Mexican goods is that they would pose considerable harm to the U.S. economy and CRE markets.

Despite the climate of uncertainty, Cushman & Wakefield expects liquidity to expand during the remainder of the year, supported by record levels of dry powder, stable monetary policy, a robust U.S. economy and rising investment under the opportunity zone tax incentive program.

Transaction cap rates have remained largely stable during the first quarter, according to C&W's report. Apartment and office yields compressed modestly year over year, while retail remains under pressure, particularly in secondary and tertiary markets.

Separate from, but not unrelated, to the movement in Treasurys, the Fed is feeling mounting pressure to make rate cuts this year. With only five Fed meetings remaining in 2019, the market is currently seeing an 83% and 50% probability of a 25-basis point and a 50-basis point reduction, respectively, in the target federal funds rate before year's end, according to C&W.

The Fed's tone has changed in the past few weeks, as Chairman Jerome Powell recently said that the Fed would "act as appropriate" to sustain economic expansion, while St. Louis Fed President James Bullard said rate cuts “may be warranted soon” amid the U.S.’ international trade disputes.

Most Wall Street analysts agree that there will be rate cuts, but not everyone is persuaded that the central bank will take that action this year. Goldman Sachs analysts, for example, aren't expecting any such move in 2019.