Biggest Risk for Investment: Political Unpredictability

The unpredictable political climate is among the biggest concerns for investors next year—along with rising interest rates and the lengthy cycle. The current administration has made irregularity its staple, and for some investors, that has caused some uncertainty. However, investors that hold onto underwriting standards should be able to weather the next downturn—whenever it comes.

“One of the biggest concerns is an unforeseeable or unknown event that could occur as a result of the current political climate,” Adam Hooper, co-founder and CEO of RealCrowd, tells GlobeSt.com. “This administration and the political environment overall has been a bit unpredictable, which has created some uncertainty among investors resulting in a more cautious investment approach.”

Rising interest rates and the length of the cycle are also top concerns, according to Hooper. The Fed increased interest rates again in September, and many expect that they will up them again in December and several times in 2019. Additionally, next year will mark the longest economic recovery in history, begging the question, when will it end? “There is also growing concern in regard to rising interest rates and whether we will now be moving into an inflationary environment. Interest rates have been on a steady uptick over the last year, and we anticipate this will continue into 2019,” explains Hooper. “Lastly, we are currently in one of the longest market recovery and growth cycles in recent history. Many anticipate that we may see a slight market correction in the next few years and most certainly a tempering of the strong growth we’ve been enjoying in our industry.”

As a result of these concerns, RealCrowd’s 2019 strategy is focused on conservative underwriting standards and shrewd attention to fundamentals. “As always, we urge investors to truly do their homework and have a deep understanding of the risk they are taking with all of their investments,” adds Hooper. “We remain heavily focused on education and providing investors with the tools to make smarter investments. We want our investors to have the tools to understand and break down complex deals so that they are not just focused on the projected return, but rather starting with risk.”

While this has been RealCrowd’s strategy, Hooper says that some investors have become too focused on returns. “In our industry specifically, we have seen an unfortunate trend of focusing solely on the returns provided without a full understanding or appreciation for the risk investors are taking to get those returns,” he says. “While our platform is geared towards providing everyday investors with access to commercial real estate deals that have traditionally only been available to institutional investors, we know there is a lot of work to do in helping those investors get to the bottom of how much risk they should be taking on.”