Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you invest.

DESPITE two big political distractions, company earnings, including from high-profile tech stocks like Facebook, are likely to remain the key driver of markets.

Earnings season

Something like 200 of the S&P500’s constituents are due to update us this week and there are plenty of reports on this side of the pond too. Technology is a key focus. Likely to remain in investors’ good books will be Apple and Amazon, two big pandemic beneficiaries. Very much out of favour is Facebook, under fire for its apparent failure to control divisive content in India, while at the same time fast becoming a yawn for younger users. The good news on earnings more broadly is that the outperformance of expectations seen in the first and second quarters is being repeated in the third. Growth is currently pencilled in at 32% year-on-year for the three-month period.

The Budget

The main set-piece political event this week is the Budget. Rishi Sunak’s time as Chancellor has coincided with the Covid-19 pandemic. He was praised for his initial handling of the crisis. Now he faces the more difficult job of getting us all to pay for the £400bn or so of spending he signed off on last year. Areas in focus will be pensions (as usual), capital gains and inheritance taxes, and student loans. Expect an outcry if the young and poor are called on to bail out the government’s older and wealthier core voters.

COP26

The other big political event is the COP26 climate summit in Glasgow, starting on Sunday and running for two weeks. There is widespread agreement that the window of opportunity to hit the global warming targets set at the 2015 Paris summit is rapidly shutting. This is the opportunity for around 200 countries to set out credible plans to limit greenhouse gas emissions and cap warming to 2 degrees, or preferably 1.5, by 2050. That seems like a long way off but unless action is taken now, the goal won’t be reached with big implications, particularly for the world’s poorest nations. The worry is that the world’s main polluters are not committed. Neither Vladimir Putin nor Xi Jinping are expected to attend.

Inflation

The other big market mover is inflation. And with UK petrol prices hitting a new all-time high, the energy sector is looking like one of the few beneficiaries from a newly ‘stag-flationary’ environment of rising prices but sluggish growth. For investors, the relative performance of energy and consumer stocks raises the question of whether last year’s rotation from growth to value shares is back on the radar.

Bitcoin

And finally, Bitcoin is back in focus, if it ever went away. The launch of crypto-tracking ETFs in the US has opened up the market to a wider set of potential investors who want the simplicity of investing in bitcoin alongside all their other investments. No surprise that the main crypto currency has hit a new all-time high above $66,000.

Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. Investments in emerging markets can be more volatile than other more developed markets. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to a Fidelity adviser or an authorised financial adviser of your choice.

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