Opinion: strengthening your portfolio during volatile times
The economic climate is rapidly changing. It can be difficult for us to know where we should invest our business energy, and how to steer portfolios. It would be difficult to draw a clear conclusion if one looked at the 2023 outlooks offered by thought leaders in the market.
According to Goldman Sachs, this downturn will be different than previous ones, making it more difficult to evaluate. We can take comfort in knowing that the growth forecasts for next year are positive at 1.8%. This is higher than many European countries who are already in recession.
JP Morgan is trying to communicate that 2023 will not be a good year for the economy, but it will be a better year overall for the markets. Inflation could be on the decline.
JPM Research reports that “U.S. JPM Research found that real estate leaders are more optimistic about the nation and global economies than U.S.business leaders.
Morgan Stanley, on the other hand, seems more optimistic, believing that the economic foundation must remain strong and will not collapse. Credit Suisse views this period as a fundamental reset. Overall, Europe appears to be entering or may be already in a recession, and is at its most vulnerable point since 2008.
CBRE’s House View Economic Outlook for 2023 predicts that inflation will fall to 4.1% YoY in Q4 2023 but that the unemployment rate will continue to rise as the year progresses.
Who is right?
Investors are finding it difficult to make informed decisions due to uncertainty in the global economy. It can be difficult to determine who and what to believe, as reports vary depending on the stakeholder.
My team and me approach every deal with fresh eyes, and without relying on previous opinions. Although the market has changed, no one knows where it will end. We will evaluate projects based on their merits and keeping in mind the new credit fundamentals. We are also more focused on finding the right developers who have demonstrated their character and experience in different cycles.
We are seeing the greatest opportunity in projects where we can provide “rescue capital”. These are projects that are otherwise strong and have great developers, but have been delayed by forces outside their control, such as construction slowdowns or rising rates.
This allows us to partner with other investors and bring fresh capital at favorable terms. The developer can then complete the project, protect their equity and take advantage of the remaining upside.
Diversifying your investments can help you to build your financial portfolio in volatile times.
Joe Berko is Astor Realty Capital’s CEO and co-founder.