Weekly Market Insight

Latest Economic & Market Update 25th September 2020

25th September 2020

Good afternoon, it is September 25th 2020 and here is your economic and market update from BlackBee. 

Today’s focus:

  • US Policy makers reopen fiscal policy talks without agreement
  • European Equity Index EuroStoxx 600 at lowest level in 3 months 

US equities performed positively on Thursday after a difficult week so far. Dow Jones (0.20%), S&P 500 (0.30%) and NASDAQ (0.37%) all rose on hopes that a US fiscal support deal would be agreed by Congress. Democrats and Republicans reopened the conversation on a new stimulus package although an agreement is still not certain and may not be resolved until after November’s election result. As mentioned earlier this week, presidential election risks linger in the US equity markets. (Source: Bloomberg)

European equities performed poorly in contrast to US shares. The EuroStoxx 600 index was 1.02% lower than the previous day and reached 355.85, its lowest level in three months.  The FTSE 100 retreated 1.30%. Philip Lane, the ECB’s Chief Economist, stated yesterday that virus containment must be a priority for policy makers – “The first priority is to contain the virus – if there is a sustained surge in cases, this will damage consumer and investor confidence.” (Source: Bloomberg, RTE)

With European C19 cases increasing this month, in addition to slowing economic growth according to PMI figures released this week, alternative investments less cyclical in nature than the typical service or manufacturing returns of equity markets are becoming a viable option. Risk factors including future C19 regional restrictions, a no deal Brexit or deflation in the monetary union contribute to an uncertain investment landscape in Europe. In a bid to increase consumer consumption and avoid deflationary pressures, the ECB are unlikely to raise interest rates for some time. The Federal Reserve indicated last week that rates would remain near zero until 2023. Alternative asset classes in this low yield environment are an increasingly attractive investment opportunity.

Diversifying investment exposure to areas underpinned by high demand, relative lack of competition and government backing should be considered. Investment in social housing projects is one possible method. The Government’s Rebuilding Ireland plan targets 10,000 long-term social housing leases by 2021 but at the end of 2019, only 43% of this target had been met. A shortage of social housing exists in Ireland, with the topic a heavy focus of the government election held back in February. With the upcoming national budget likely to be dominated by Covid 19 fire-fighting, the scope for new build social housing government expenditure may be limited. Ready built homes in need of minor refurbishment require significantly less capital expenditure than new builds and provide near term occupancy potential. This quarter, Government contributions to refits of homes for social housing purposes include €1.6m in Donegal, €1m in Waterford and €1.3m in Clare. BlackBee are seeking to add to this societal contribution with acquisition, refits and providing housing opportunities in Mayo and Sligo.

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

Global Market Update
(as at close of markets 24/09/2020)