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Brett Shiller, head of healthcare corporate client banking at JPMorgan, said interest rates are expected to fall in 2024, changing the landscape for healthcare investing heading into the new year.
“We think rate cuts will start by the second or third quarter,” Shiller said.
In mid-December, the U.S. Federal Reserve said it expected to cut interest rates three times this year, according to the Wall Street Journal.
This opens up opportunities compared to early 2023, when Moody’s predicted interest expenses for most low-rated healthcare companies would increase by 20%.
As interest rates rise, valuations tend to fall.
High interest rates were just another challenge for hospitals in 2023. Another was high labor costs, but this factor also showed signs of improvement by the end of 2023.
As interest rates rise to curb inflation, health-care services companies, including technology companies, are delaying public offerings or seeing sales activity dry up, Shiller said. Products may be stored in a warehouse.
“Eventually we’re going to have to make a deal,” Schiller said.
Debt is expensive. As money becomes cheaper, the market opens up to organizations that previously refrained from raising capital or selling their services or products.
“We’ve seen people preparing to sell and enter the capital markets,” Schiller said. “They’re literally waiting for the Fed’s first rate cut.”
Avoiding a recession also looks promising, leading to improved consumer and retail statistics. The aim of achieving this balance is to reduce personnel.
Shiller spent 16 years on the healthcare banking side and joined JPMorgan as the coronavirus was labeled a pandemic. His group focuses on companies with revenues of his $500 million.
So far, he said, there has been a “positive” impact on investment since 2024 is a presidential election year.
“Aside from insulin and drugs, neither party has been very active on it,” he said. Unlike in past elections, there are no loud voices calling for the repeal of Obamacare.
“For me, it’s very exciting,” Schiller said of starting the new year. The past year has been “very slow in terms of capital and M&A,” he said.
Twitter: @SusanJMorse
Email the author: SMorse@himss.org
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