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Hybrid Vigour

Week in review: Hybrid vigor

This week: Companies go hybrid, Yellen’s last push and alien artifacts.

With the Nasdaq gaining some 28% this year (and Bitcoin up a mere 1,624% against the U.S. dollar), technology’s been the talk of the town. But the lines between technology companies and other areas of the market are increasingly blurred.

Conventional retailers and e-commerce firms are far less distinguishable than they once were. Instead, chimera-like companies are combining aspects of both. Amazon now owns bricks-and-mortar stores in the form of the Whole Foods franchise and its own bookshops, for example, while most of the big retail names offer online services to complement their physical presence. And given the ubiquity of Apple stores, even a tech champion like Apple is as much a feature of the high street as of the household. Hybrids, it seems, are here to stay.

Purplebricks is a case in point. This week, the estate agent upgraded its growth forecasts and announced that its revenues had risen by an eye-catching 150% in the six months to the end of October. The company attributes its success to its hybrid business model, which combines an online, branchless service with locally based agents who visit sellers’ properties. Although the UK-listed company continues to make a loss as it expands in Australia and the U.S., its soaring revenues and dominant share of the UK online market underscore the strengths of its hybrid approach. Purplebrick’s shares are up more than 160% this year – putting the Nasdaq somewhat in the shade.

Retail rebounds

This week’s figures showed that the UK high street is in better health than many had feared. November’s retail sales grew by 1.6% (year on year), up from zero growth in October. This apparent economic resilience combined with a weaker pound to drive the FTSE 100 up 0.70% by the end of Thursday.

Retail sales also came in ahead of expectations in the U.S., where optimism about the economy helped to propel the S&P 500 to new all-time highs during the week. It finished up 0.02% by Thursday’s close.

Yellen bows out on a higher note

In her last significant act as chair of the U.S. Federal Reserve (Fed), Janet Yellen raised the federal funds rate by another quarter of a percentage point, to a range of 1.25% to 1.5%. The move was widely expected and caused little reaction in the markets. But the Fed also increased its growth forecasts for the next three years. Investors liked that, and their enthusiastic response helped to sustain the rally in U.S. stocks.

Meanwhile, the European Central Bank (ECB) kept rates unchanged but raised its growth forecasts for the Eurozone. Mario Draghi, the bank’s president, hailed “a strong pace of economic expansion and a significant improvement in the growth outlook.” European shares lagged behind their global peers, however, with the FTSE Europe ex UK index down 0.40% by Thursday’s close.

Disney catches Fox

The biggest deal of the week was Walt Disney’s purchase of 21st Century Fox’s entertainment assets for a cool $52.4 billion. These include the 20th Century Fox film studio, streaming service Hulu and Fox’s substantial stake in Sky.

The deal also gives Disney an expanded back catalogue of films, including the original Star Wars. “May the Force be with us,” said Disney chief executive Bob Iger. Investors reacted enthusiastically to this carve-up of the Fox empire, with Disney’s shares up sharply on the news.

Incumbents inconvenienced

In politics, upsets for ruling parties provided the theme of the week. In the UK, Prime Minister Theresa May’s government lost a vote on an amendment tabled by former attorney general Dominic Grieve, which called for a parliamentary vote on the final Brexit bill. Another 10 Tory Members of Parliament (MPs) joined Grieve’s rebellion, leading to a narrow defeat for the government.

Meanwhile in the U.S., the Trump administration suffered a blow after Roy Moore, the scandal-hit Republican candidate, was defeated in Alabama’s Senate election. Trump had thrown his full weight behind Moore, but the loss leaves the Senate split just 51–49 in favor of the Republicans. Next year’s mid-term elections are looking finely balanced – and the passage of Trump’s tax reforms may be less certain than it looked last week.

And finally…

Is there anybody out there? That was the question being asked this week as scientists, journalists and the tinfoil-hat fraternity contemplated Oumuamua, an asteroid that passed close to Earth in October.

Why? Because Oumuamua is no ordinary asteroid. The rough and tumble of space travel tend to leave most space rocks in roughly spherical form. But Oumuamua has a distinctive cigar-like shape, suggesting to some that it might – just might – be an alien artifact.

On Wednesday, the Breakthrough Listen program, which searches for extra-terrestrial life and is funded by technology investor Yuri Milner, announced that it would use the Green Bank Telescope in West Virginia to check for any transmissions that Oumuamua might be making. So far, no alien broadcasts have been intercepted.

Important Information

Indices are unmanaged and have been provided for comparison purposes only. No Fees or expenses are reflected. You cannot invest directly in an index.

Companies mentioned for illustrative purposes only and should not be taken as a recommendation to buy or sell any security. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in this list.

Foreign securities are more volatile, harder to price and less liquid than U.S. securities. They are subject to different accounting and regulatory standards, and political and economic risks. These risks may be enhanced in emerging markets countries.

ID: US-151217-54173-1