Week in Review: FTSE 100 briefly tops 7,000 but falls away

FTSE news

The FTSE 100 was flat on Thursday (29 April) despite briefly reaching above 7,000 again - the second time in a fortnight. The index was down slightly by 0.31%, finishing the session just below the 7,000 mark at 6,961.48.

• Monday (3 May) is a Bank holiday, which means markets are closed in the UK
• On Tuesday (4 May) the latest CIPS/Markit manufacturing PMI is released giving insights on the health of UK manufacturing
• The CBI publishes its latest SME trends survey on Wednesday (5 May) – this is a good barometer for the health of small and medium-sized enterprises in the UK
• On Thursday (6 May) the Bank Of England announces the latest UK interest rate decision
• CIPS/Markit publishes its construction PMI on Friday (7 May) which will give an indication of the health of the construction industry in the UK

Sector in focus

Pharmaceuticals, for obvious reasons, have been at the forefront of the news agenda for a long time now. It is perhaps underexplored in investment terms though.

Investing in pharmaceutical companies has often been something of a high-risk strategy. While some companies have interesting USPs, it is a highly competitive market with many vying for attention when it comes to drugs and other therapeutic products.

Firms such as Pfizer (PFE), which reports its Q1 results on 4 May, have been at the forefront of the coronavirus vaccine campaign, alongside peers such as Astrazeneca (AZN) and Moderna (MRNA).

Astrazeneca and Pfizer have both recently announced successes – the former with a new Malaria vaccine, and the latter with a pill to potentially treat coronavirus symptoms. The Malaria vaccine in particular highlights the positive ethical impact a firm like Astrazeneca has for potential investors.

But, while innovation in pharmaceuticals can be lucrative, often companies have a limited time to hold intellectual control of new drugs before generic versions are allowed to be produced by others. It is also a political minefield, as the EU-Astrazeneca row has recently demonstrated all too painfully.

Economic update

US President Joe Biden has launched an eye-opening economic plan to rebuild the US economy in the wake of the coronavirus crisis.

Political commentators have likened his American Jobs Plan and American Families Plan as his ‘Roosevelt New Deal moment’.

The two plans combined promise to deliver some $4 trillion of spending toward the US economy and households, with some of the biggest welfare benefit overhauls in 50 years.

The spending, the White House says, will largely be funded by rises in corporate taxation, which could prove troublesome for US businesses. Biden is on the international campaign trail however, looking for other major economies to follow suit and harmonise corporate tax rates around the world.

While this would in principle make it harder for certain corporate giants to avoid taxation, it will not necessarily go down well with some nations either. Countries like the Republic of Ireland rely on low corporation tax rates to encourage firms to base their operations there, and in doing so pay healthy amounts of tax in to their own economies.

Fund watch

With a huge amount of fiscal stimulus to generate growth in the US economy, you might want to consider investing some of your portfolio in US Equities. Actively managed JPM US Equity Income C (GB00B3FJQ599) is well positioned to benefit from an economic boom as it invests in US stocks with long-term growth potential. The fund charges an OCF of 0.78% and has returned 43.7% in five years.

ETF watch

If you’d like to invest in US markets at a cheaper price point, Amundi IS MSCI USA ETF-C (CU2U) might be a good option. This ETF invests in the same companies as the MSCI USA Index, a broad spectrum of all the listed companies in the US. It has returned 65.4% in three years and charges an OCF of 0.28%.

Company announcements

5 May 2021 – Fast fashion firm Boohoo (BOO) reports its full-year results next week, in a year in which it has seen success but also courted controversy. The Boohoo brand is now synonymous with so-called ‘fast fashion’ but this has come at the cost of ethical considerations from some of its supplier firms, which in 2020 were found to have been engaging in modern slavery practices. Investors will be focused on how the firm has performed despite this scandal, and whether it is positioned properly to keep growing while tackling this issue head-on.

7 May 2021 – International Consolidated Airlines Group (IAG), the owner of British Airways and Iberia, reports its Q1 results during what continues to be a highly troubled time for the firm, with travel restrictions continuing to be enforced widely across the world. While air travel may bounce back this year amid the vaccine rollout, it is likely investors will be watching for how IAG has managed to staunch its losses in what has been a miserable time for the firm.