Earlier this week, U.S. economists, investors, lenders, and political enthusiasts were able to wake up and breathe of sigh of relief. Sunday’s French presidential elections closed with Emmanuel Macron claiming victory as the youngest president in French history.
With Macron’s win over Marine Le Pen many economists are predicting stability in the European Union (E.U.) for the foreseeable future. However, others are not so sure. As stated by J. Scott Scheel, International Commercial Investment Strategist and the Founder of The Commercial Academy, “This election is a temporary staving off of the failure of the E.U. But, for the time being, this will stabilize the financial market place.”
With the impact of Brexit on the value of the Euro, losing another big player would have been the final straw for the E.U. Luckily, President Macron has made building a strong Europe one of his main priorities. A point he illustrated during his acceptance speech saying, “I will defend Europe, the common destiny the peoples of our continent have given themselves.”
The greater concerns for the long-haul are the social concerns of integrating many vastly differing cultures and ideologies. Over the next decade the European Union certainly stands to face many challenges and uncertainties. As a world currency, the Euro’s long-term viability and purchasing power will be challenged. But, for now, it seems to be out of immediate eminent danger.
Although the U.S. stock market proved to be resilient in the face of the many geopolitical obstacles of 2017, the fact was that the results of the French election could have contributed to massive Sell Offs or even a Frozen Credit Market.
Geopolitical events like the French election are used by financial institutions to determine whether they will continue lending or withdraw from the cycle of billions which are borrowed and paid back on a daily basis.
With Macron as president, the banking sector will still lend. They will continue to remain rational in their lending practices and lend with sensitive loan terms and rates as they have since the U.S. began its recovery from the recession.
Financial institutions are the pinnacle of traditional financing, but are not always the best option for financing commercial real estate. Geopolitical events have a tendency to send these lenders into a frenzy where terms and rates can quickly become irrational. The market may have been lucky with the results of the French elections, but there will always be a struggle to maintain this resilience.
Creative Financing can be a better option during uncertain markets. Many commercial real estate professionals use this as means to get their projects funded as this type of lending is not controlled by the stock market or current political climate.
If you are looking to explore your options when financing your next CRE project please join us for an upcoming Commercial Property Academy!