1/09/2024

Macro View Investing in Fintech 2024

Buckle up, fintech cowboys, because we're riding a bull named "commercial real estate" and the macroeconomic rodeo is not for the faint of heart. Sure, CRE fintech throws a mean lasso at inefficiencies, but when the global orchestra starts tuning its recession violins, those fancy algorithms can trip over some mighty tumbleweeds. Let's unpack the macroeconomic risks that could turn your unicorn valuation into a donkey cart.

1. Interest Rate Hangovers: Remember when cheap money flowed like tequila at a fiesta? Yeah, those days are drier than a sunbaked cactus. Central banks are cranking up rates to tame inflation, making borrowing for CRE projects pricier than a diamond-encrusted chaps. This squeeze can stall development, cramp exit strategies, and leave investors nursing a hefty hangover of debt.

2. Stagflationary Sandstorm: Inflation's a fickle beast, and when it cozies up to stagnant economic growth, the result is a nasty slow sandstorm. This double whammy can erode rental income, slash property values, and make long-term bets feel as secure as a house of cards in a hurricane.

3. Recessionary Blues: If the global economy stumbles into a recession, the dance floor for CRE empties faster than a saloon at closing time. Businesses hunker down, demand for space plummets, and vacancies skyrocket. Suddenly, your sleek fintech platform feels like a disco ball in a ghost town.

4. Tech Tonic Shift: Technology ain't a monolith. Trends flip faster than a trick rider on a bucking bronco. What's hot today (think VR property tours) could be yesterday's news tomorrow. Fintech solutions must stay nimble, or risk getting trampled by the next disruptive innovation. Fintech companies claim all sorts of bells and whistles that lenders, banks, credit unions, syndicators, financial wizards don’t need or want. The app or the software they are selling as sliced toast has to fit or plug in by API easily to the existing platform that the client uses.

5. Regulatory Wranglers: Governments don't always appreciate the fintech rodeo. Regulations can lasso your platform tighter than a steer in a branding iron, stifling innovation and adding compliance costs that drain your cash flow faster than a thirsty prospector at a gold mine. CFBP, SEC, FINRA, and the Federal government are fast track researching and fining everyone.

But hold your horses, partners! This ain't all doom and gloom. Smart fintech plays can weather the storm. Here's how:

  • Focus on resilience: Build platforms that adapt to changing market conditions, like adjustable interest rates or alternative financing models.
  • Embrace data-driven decisions: Use AI and analytics to sniff out risks and opportunities before they stampede the market.
  • Target niche sectors: Don't try to herd the whole cattle drive. Focus on resilient asset classes like logistics or healthcare that thrive even in choppy waters.
  • Partner with established players: Team up with brick-and-mortar giants for stability and market access.
  • Stay nimble and adaptable: Be the fastest horse on the range, ready to pivot and innovate when the economic winds shift.

So, there you have it, partners. Investing in CRE fintech is a high-stakes gamble, but with the right grit, data-driven savvy, and a touch of adaptability, you can navigate the macroeconomic minefield and emerge with your Stetson still on your head. Remember, in the rodeo of real estate, it's not about riding the bull; it's about staying in the saddle when the dust settles.

Now, go lasso those fintech opportunities, but keep your spurs sharp for the inevitable macroeconomic buck offs!

So to be serious here’s the events, history and forward crystal ball facts we need to follow:

Macroeconomic factors are those factors, events, or situations that affect the national economy on a broad scale. Examples of macroeconomic factors include: 

Inflation, Gross domestic product (GDP, National income, Unemployment levels, Fiscal policy, Employment levels, International trade. 

The macro-environment is made up of six different forces: 

Economic environment, Political environment, Demographic environment, Social-cultural environment, Technological environment, Ecological environment. 

·        Interest rates

Mortgage interest rates for commercial real estate financing have nearly doubled since the beginning of 2022. Higher borrowing costs and market uncertainty have led to a decline in real estate transactions.

·        Inflation

When inflation is high, this means that prices of goods, including that of homes, are rising.

·        Credit quality

The creditworthiness of the borrower and their business has a big impact on commercial real estate loan rates.

·        Macroeconomic risk

This includes activities such as monetary policy changes, political or civil unrest, population migration, and shifts in tax regimes.

Other factors that can affect the commercial real estate sector include: 

  • Economic growth
  • Employment rates
  • Consumer spending
  • Supply and demand dynamics
  • Income pressure
  • Refinancing needs
  • Rising costs
  • Reduced operating margins
  • Debt maturing over the next 18 months

 

Caroline Gerardo NMLs 324982 my opinions are my own