In January, National Real Estate Investor published an article that began with a look at the S&P 500 through the third quarter of 2018 and ended on a high note with a positive outlook for alternative investments in general and real estate investing in particular. Has anything changed since then?
Actually, the S&P 500 has rarely been better. In fact, 79.3% of 29 reported companies have exceeded analyst expectations. Not only that, but the Dow and Nasdaq are just both just 1.6% below their recorded highs. Stocks are aiming for the skies.
But hold onto your hat because analysts are now predicting a slight turnaround.
Bull or Bear Market in 2019?
Markets are hard to predict. In times of volatility and rapid change, they can turn on a dime. Today, analysts are concerned about the global economic outlook and what might happen with China. An American Express study found that chief finance officers have a positive outlook overall, but not as positive as a year ago. That’s good news, but it’s not great news.
The International Monetary Fund recently reported it expects a pullback on global economic growth. Instead of growing 3.5 percent as forecasted in January, the IMF expects the economy to grow just 3.3 percent. That’s a far cry from a recession, so there’s no need for alarm. However, it does indicate that confidence is waning.
Stocks had a good first quarter, but with these outlooks, the rest of the year might not be as good. They could still be good, just not as good. In other words, I don’t see a bull or a bear.
Why Alternative Investments Aren’t Cooling
Regardless of what happens in the stock market, alternative investments like real estate should remain a part of your portfolio. If the market turns sharply down, you’ll be glad you invested in real estate. You might even complement it with commodities and other alternatives.
If the stock market takes an upward turn, you’ll still want diversification, and real estate is usually a good bet. Commercial real estate will likely be the best bet for a market upturn because when company stocks do well and businesses are in expansion mode, they tend to invest in real estate. The big question is whether you should invest in development or rentals.
Marketplace Lending is a Safe Bet for Transitional Markets
I’d say we’re still looking at a transitional market, not just in real estate, but also in stocks. In fact, the entire economy seems to be in a transitional mode. How long it will take to make the full transition is anyone’s guess.
With marketplace lending, you can bypass the ownership dilemma. You cut out holding costs, and it’s easier to move your money around if it isn’t tied up in a physical investment. There’s nothing wrong with owning properties, especially if they’re appreciating in value, of course. On the other hand, if you need a quick exit strategy due to the unpredictable nature of the markets and their potential for quick turnaround, then fractional ownership on a short-term loan or real estate development can help you gauge where the market is headed long term and allow you to shift your asset mix if the need arises.
At the end of the day, private investors would do well to maintain a good mix of alternative investments, including real estate, and rely on crowdfunding platforms for short-term investments and to keep some of those assets liquid. Whichever way the market ends up turning, you’re more likely to come out smelling like a rose.