The latest FTSE 100 reshuffle, the results of which are due to be announced after the close on Wednesday 3 March, could be relatively quiet this time around, with just one demotion and one promotion.
“Pennon and Weir are the two firms that look most likely to swap places, although grocer Morrison could also head out of the UK’s premier index, opening the way for a FTSE 100 debut for specialist distributor Electrocomponents,” says Russ Mould, AJ Bell Investment Director.
Much will depend upon the next few days’ trading but it is noticeable how firms whose business models were initially hit hard by the pandemic, such as Weir, Howden Joinery and ITV are inching their way back up the ranks, as measured by market capitalisation, while those who were seen as relatively unaffected or even beneficiaries of lockdowns, such as Pennon and Morrison are sliding down.
“This does suggest that investors are currently looking for recovery plays and moving away from perceived havens, in the view that the UK’s leading vaccination programme, added to a Brexit deal and ongoing stimulus from both Government and the Bank of England, mean better times lie ahead for the economy, and therefore corporate profits and cash flows.
“This can also be seen in which sectors within the FTSE 350 have done best not just since Pfizer Monday (9 November 2020), when investors were given real hope that a solution to the COVID-19 crisis could be at hand, but even over the last 12 months as a whole. Hope does seem to have replaced fear. This is all well and good so long as it does not then turn to greed, as that is when investors begin to get over-confident and take on too much risk – and too much risk usually leads to accidents and trouble in the end.