Week in Review: FTSE off slightly as Biden gets to work in Washington

FTSE NEWS

The FTSE 100 was down slightly on Thursday as Joe Biden’s term in office as US President got underway. The UK’s top index of firms was down 0.37%, closing at 6,715.42 - while the FTSE 250 lost slightly more, down 0.42%, finishing the day at 20,793.72.

• The World Economic Forum’s annual ‘Davos’ Agenda meeting kicks off on Monday (25 January) with China’s Xi Jingping and Bank of England governor Andrew Bailey participating
• On Tuesday (26 January) the Office for National Statistics reports the latest wage growth and employment figures in the UK, among other monthly labour market data
• The US Federal Reserve makes its latest interest rate decision on Wednesday (27 January)
• On Thursday (28 January) the US reports its first set of 2020 Q4 GDP data, for an indicator of how the world’s largest economy saw out last year
• Finally, on Friday (29 January) Germany also reports its first set of 2020 Q4 GDP estimates

SECTOR IN FOCUS

If you had to pick one sector of the stock market that has been a ‘winner’ during the pandemic, it would be hard not to immediately opt for tech. While a broad category in investment terms, many tech firms have been able to continue to offer their services despite the pandemic, meaning they have noticed very little disruption in demand. In fact, many of them have seen demand surge as their customers were confined to their homes.

Firms such as Netflix (NFLX) and Disney (DIS) have ridden a wave of subscription sign ups to streaming services as people spend more time on the sofa with little to do otherwise. Disney in particular saw its share price soar in 2020 chiefly on the exponential growth of its streaming service Disney +, which it fortuitously launched early last year.

Elsewhere European tech firms like German-based HelloFresh (HFG) and UK-listed Ocado (OCDO) have capitalised on people’s avoidance of supermarket shopping and turned to the internet for their groceries.

Finally, delivery, streaming and cloud webhosting giant Amazon (AMZN) is perhaps the firm that has gained most over the past year. The giant has tentacles in groceries, streaming, delivery and web services and was perhaps better positioned than any other firm in the world to capitalise on the disruptions around the world. The firm is reporting its 2020 Q4 numbers on Thursday (28 January), in which investors will be keeping an eye on just how well it has performed.

ECONOMIC UPDATE

On Wednesday (27 January) the US Federal Reserve, the central bank of the United States, will make its first interest rate decision of 2021. While the chair of the Fed committee is Jerome Powell – a Trump-era pick for the position, there will no doubt be questions over a change of direction with a new administration in the White House.

Powell has indicated that rates will stay low for the foreseeable future, with the various monetary programs to support markets continuing unabated. Biden however will mark a change of fiscal tone from the more parsimonious Republican years.

Congress is now effectively in complete Democrat control. The indication from this, in economic terms, is that a much bigger package of fiscal measures is coming for the US economy and people to help businesses and households cope with the ongoing issues of the coronavirus pandemic.

While the size and contents of the package are yet to be agreed, it is likely to provide succour to markets at a time when confidence is thinly balanced thanks to vaccine rollouts but surging cases across the world. The US has a habit of leading by example, so where its economy and economic policies go, others including the UK, tend to follow.

FUND WATCH

Investors interested in technology as a theme may want to consider Polar Capital Global Tech I Inc (IE00B42W4J83). The actively managed fund picks a global range of tech companies at the forefront of the most exciting innovations in the world. The fund has returned 354% over five years and has an ongoing charge (OCF) of 1.13%.

COMPANY ANNOUNCEMENTS

26 January – Microsoft (MSFT) presents its Q2 results to the market during what has been a good year for the information technology and hardware business. Questions have lingered over the firm’s inability to capitalise on trends that others such as Zoom (ZM) have jumped on during the pandemic, but Monday’s results will shed some light on how much it has been able to push back against these competitors with software such as Teams.

28 January – European air carrier Wizz Air (WIZZ) reports its interim results to the market at a time when its fortunes appear to be running contrary to most other major airlines. The firm has held its nerve while other competitors have lost huge amounts of ground in recent months, with the likes of Norwegian seriously scaling back their routes and bases. Wizz air in fact is one of the few airlines which has announced a recent expansion of the routes it covers, with six new destinations added to its list.