Weekly Market Insight

Latest Economic & Market Update 23rd December 2020

23rd December 2020

Good afternoon, it is December 23rd 2020 and here is your economic and market update from BlackBee. 

Today’s focus:

  • BioNTech & Pfizer’s vaccine still considered to be effective against new strain.
  • Resilience of the Irish Commercial Property Sector.

Six weeks. That’s how long it would take BioNTech & Pfizer to produce a vaccine against mutations of the coronavirus. According to BioNTechs chief executive Ugur Sahin, the “beauty of the messenger mRNA technology” allows labs to begin engineering a vaccine that mimics the new mutation. BioNTech & Pfizer’s existing Covid-19 vaccine is considered to still be effective against the new strain however existing technology would allow them to manufacture a new vaccine within six weeks. The existing vaccine will be tested over the next two weeks so they can quantify how well it works against the new strain.

The new strain is rapidly spreading across the UK forcing new lockdowns and isolating England, Scotland & Wales from the rest of the world. Cases of the new strain have been identified in Denmark, Iceland, the Netherlands, Australia and Italy. Although Ireland hasn’t had sight of any cases of the new strain yet, Taoiseach Michael Martin stated yesterday that the “safest and most responsible thing to do” is to act as if the new strain is already in Ireland. Minister for Health Stephen Donnelly also stated that the first Covid-19 vaccines will be administered on 30th December. (Source: Financial Times).

2019 was a bumper year for investment in the Irish Commercial property sector where volumes reached an unprecedented €7.2 billion. Prior to COVID, 2020 was expected to point to an easing of both investment volumes and total returns. The pandemic certainly put paid to that scenario with less travel and more uncertainty around the global economy leading to a big drop off in property investment.

Despite this, demand for core real estate remained resilient with expectations that the annual investment spend will be near €3 billion, a decent result all things considered. Property yields have remained resilient thus far although one wouldn’t be surprised to see some modest widening in early 2021. A huge theme this year has been that the pandemic has again squeezed interest rates, bond yields and therefore investor income lower. This is perfectly illustrated by the chart below (from Brandywine Global Investors) which shows that money markets are now pricing in negative interest rates for the Euro zone for the next five years! Add to this the volatility and pressure on dividends in the public equity markets and one can see why investors might look even more favourably on commercial property as an income generating asset class in 2021 as we move beyond COVID 19. (Source: Irish Times, CBRE)

Best & Worst Performers of Large Cap US Stocks on Tuesday
Click image to enlarge

Global Market Update
(as at close of markets 22/12/2020)