On July 31, the Dow Jones Industrial Average dropped 317 points, erasing all of 2014’s gain, mainly on news that Argentina would default on part of its debt for the second time in 13 years. But just three weeks later, even as the Argentina situation worsened, the Dow recovered from its initial loss and crossed the 17,000 mark again.

In the real estate investment world, we’re always watching for threats to economic growth, so anything that potentially affects the stock or bond markets is a matter of some concern. A failure of sovereign debt can have direct implications to real estate funds, but the indirect cost of market instability could be even greater.

The cost of Argentina’s 2001 default has been calculated at more than $83 billion in direct losses to bondholders and $63 billion in indirect costs to equity investors and taxpayers. After a restructuring, Argentina got more than 90 percent of its debt out of default by 2010, but some investors rejected the deal and sued. Those lawsuits are behind the current default, triggered by a U.S. court order blocking Argentina interest payments to creditors until the lawsuits are settled. As of this writing, Argentina disputes that it is in default since it is able to pay creditors.

U.S. markets sunk on the initial news but recovered quickly as the complexity of the situation sunk in. Some analysts believe the initial reaction was due in part to under-the-surface jitters about a stock run that has not seen a market correction in almost three years. In the post-war era, corrections of at least 10 percent have come every 20 months on average.

It’s not clear what might trigger a correction. Stock prices have risen amid geopolitical upheavals in Ukraine, Iraq, Syria, Gaza and Libya, not to mention the recent stagnation in the Eurozone’s GDP that’s expected to continue through at least the third quarter. Even if there is a correction, real estate markets might not be significantly affected if job growth continues to be strong. In fact, many believe that overseas hostilities are fueling U.S. real estate investment as global investors seek a safe haven for their capital.

There’s not always a clear correlation between stocks and real estate markets, but it’s important to pay attention to anything that could disrupt economic growth. Because real estate is an illiquid asset class, investors can’t wait for events to unfold – we need to make decisions and advise clients based on the clues we can glean from the market today. The conventional wisdom is that U.S. commercial real estate is a strong asset class based on the state of the economy, the low interest-rate environment and rising investor demand. The optimism is well-grounded, but it’s as important as ever to keep an eye on factors that could affect property values down the road.