7 January 2021

Happy New Year?

Well, we made it to Epiphany, ending the strangest festive season I have ever experienced. Fortunately, the New Year got off to a good start for the Footsie, which was buoyed by the vaccine roll out.

Investors’ initial enthusiasm waned a little as it became evident that a third period of serious lock down was about to be announced. On the first trading day of 2021, our benchmark index soared by nearly 3% within the first two hours, though settled down to close just 1.7% higher. However, buyers continued and the rally gained momentum as the week progressed.

With little in the way of company results in the offing, it is bigger picture news that is likely to set the agenda for our market. That said, we will be hearing from retail groups on the success or otherwise of their Christmas trading. Supermarket group Morrison’s announced a useful uplift in sales, citing strong sales of Champagne and salmon as contributory factors. Lock down has clearly influenced consumers’ tastes.

The announcement of further business support packages from the Chancellor of the Exchequer is being put under scrutiny, with business leaders complaining it is not enough. It will be interesting to see what, if any, adjustments are made when Mr Sunak announces his Budget on March 3rd. Meanwhile the result of the Senate election in the state of Georgia looks like setting the tone for incoming President Biden’s term in office. We are not short of news that will govern how sentiment changes in the year ahead.

One of the more interesting – and arguably positive – recent developments is the expectation that this year could well see a rise in merger and acquisition activity in this country. We have already had a bid for Entain, the owner of Ladbrokes and Coral, from American giant, MGM Resorts, valuing the FTSE 100 company at £8 billion. Elsewhere, broadcaster ITV has received some speculative interest. Shares are cheaper here than in the US, hence this possible trend. It doesn’t amount to endorsement that our market is undervalued, but it is doing no harm in the short term.

Covid and Brexit seem certain to dominate investment thinking in the months ahead, but the new Democrat administration in the White House will also play its part. Forecasting is a mug’s game, so far as stock market trends are concerned, but we do have some positives emerging. While the true wish is for a happy and healthy New Year for all, let’s hope it’s happy for investors as well.

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