Weekly Market Insight

Latest Economic & Market Update 12th November 2020

12th November 2020

Good afternoon, it is November 12th 2020 and here is your economic and market update from BlackBee. 

Today’s focus:

  • European investment in Irish care home group
  • “Financing conditions will remain exceptionally favourable for as long as needed” – Christine Lagarde

Emera, a French care group funded by private equity, has entered the Irish nursing home market by acquiring a majority stake in Virtue Group. According to The Times, Emera operates more than 6,500 nursing home beds across seven countries including Spain, Belgium and Italy. Virtue Group is reportedly set to begin construction of a 90 bed home in Dublin while the group currently manages 464 beds. BlackBee recognises the trend of increasing European M&A activity in Ireland and believes that a consolidated market with large group operators is the future of Irish long term healthcare. Aperee, the nursing home operator established by BlackBee in 2019, is currently operating 499 beds in Ireland. An initial 100 bed home development is planned for 2021 in addition to an acquisition pipeline of over 200 beds at the start of next year.

Speaking at the ECB’s 2020 Forum on Central Banking, ECB President Christine Lagarde gave a clear indication that fiscal and monetary support will remain in place until the Eurozone economy recovers from the pandemic. Following a €1.35 trillion pandemic emergency purchase programme (PEPP), as well as cutting key rates to -0.5%, Ms. Lagarde was providing assurances of ECB support to governments, households and businesses. Ms. Lagarde announced that the “The ECB was there for the first wave and the ECB will be there for the second wave.” Interestingly she highlighted the impact fiscal supports were having on workers that had their working hours reduced. The ECB’s Consumer Expectations Survey found that compensation for lower income workers fell by more than 7% in Q2 2020. However, disposable income only fell by 3% due to government support. ECB research indicates that public expenditure accounts for around 50% of total spending in the euro area and can therefore act as a coordination device for the other 50%. Ms. Lagarde stated that the survey demonstrates that people who consider government support to be more adequate display less precautionary behaviour by breaking the “paradox of thrift” dynamics. The survey shows, according to Ms. Lagarde, that by brightening economic prospects for firms and households, fiscal policy can help reinvigorate monetary transmission through to the private sector. This would appear to contrast the view of several US policy makers as they are still to agree another fiscal stimulus deal. BlackBee believes that favourable financing conditions are highly beneficial to a real asset infrastructure investment strategy. For example, prime office rents in Dublin have compressed from 5% to 4% since 2014 as ECB Deposit Rate tightened from 0% to -0.5%. Q3 2020 prime office rents in Dublin remained stable at 4% according to CBRE. (Source: ECB Forum on Central Banking 2020)

Best & Worst Performers of Large Cap US Stocks on Wednesday
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Global Market Update
(as at close of markets 11/11/2020)