With the bull market beginning to show signs of fatigue and markets starting to discount the risk of a slowdown across major economies in 2019, here we’ll explain what that means for peer-to-peer (P2P) markets and how lenders can position themselves to hedge.
Typically, periods of equity sell-off and market volatility tend to see a flight to safety in bonds and more traditional vanilla products. This time though, after more than two years of steadily rising interest rates, we believe that 2019 could mark the peak in US treasury yields for the current business cycle meaning that the road ahead is likely to be bumpy. Instead, we believe many investors may favour ‘selective’ property investments based on fundamental supply/demand trends that tend to weather cyclical downturns better than other assets. In this case, P2P property loans could represent an adequate instrument for lenders wishing to get exposure to the property market from the short-term lending side. Short-term lending of up to 24-months on loans secured against property that offer double-digit returns also enable lenders to be out in time for the next cyclical upturn, offering a short-term portfolio rebalancing opportunity during the cyclical downturn.
Indeed, a recent report suggested that appetite for alternative assets was growing among High Net Worth (HNW) investors, with a quarter of them now allocating at least one fifth of their wealth into alternative assets such as P2P lending. Another report suggests that HNW and professional investors are favouring the FinTech sector. Albeit signalling longer-term and multi-cycle trends among private and sophisticated investors, these findings are in line with the trends typically seen in the early stages of equity market corrections.
As a result, P2P platforms offering fixed returns may see an increased volume of lenders who are keen to rebalance their portfolio during periods of increased market volatility. Within P2P lending, P2P property lending has the added benefit of increased transparency with the inclusion of all loan information documents such as the RICS valuation report. As opposed to other alternative investments that could utilise investments or strategies that are difficult for most people outside of the financial services industry to understand and that carry risks that the average investor cannot afford, P2P loans – especially property-backed P2P loans – can give lenders access to simple and easy to understand products.
Ultimately though, with P2P lending as with any other investment, lenders need to know what they’re getting into and the risks involved. So, it is very important that as a lender you do your own due diligence on which platform to use before deciding to lend. Check out our available loans at http://www.blendnetwork.com and start lending now! #LendWithBlend