The Stock Market in May

It’s Sell in May time again. Already! Often stock market sayings turn out to be unreliable, at best. But the Sell in May aphorism is spookily accurate. It describes the tendency of the market to be weaker from May to October than it is for the other six-month period of the year. How true has this been? Well, in the last 33 years the saying has been right 28 times, and the average annual out-performance of the November-April period since 1982 has been 8.6%. Very few trading systems can match that record.

Monthly returns of FTSE All Share Index - Mayl (1984-2015)

Sell in May

Usually stock market anomalies, once they have been identified, don’t last long. But the Sell in May effect has been around for decades ­ one academic paper found evidence of it in the UK market starting from 1694. And the effect is currently as strong as ever. For example, for the latest period: the FTSE All Share Index was up 7.3% over the six-month period Nov 2014 to Apr 2015 and down 7.3% for the following period May 2015 to Oct 2015 (a rather oddly symmetrical performance!)

Given the strength of the Sell in May effect it is not surprising that May itself is one of the weakest months of the year for shares. There are only three months where, since 1970, the market has an average return of below zero in the month – May is one of them (the others are June and September). On average the market falls -0.2% in the month, and the probability of a positive return in the month is below 50%. Since year 2000 performance has been even worse, with an average return of -0.6% for the month.

It’s not immediately obvious why May has been historically weak for the stock market. The month is weak for most stock markets worldwide, so whatever the reason it’s unlikely to be anything UK-specific, such as the timing of the UK’s financial year.

The average market in May

On average in May the market trades fairly flat for the first two weeks of the month, and then prices drift lower in the second half ending with the weakest day of the year for shares on 30 May (although the LSE will be closed this year on that day for Spring Bank Holiday).

May is the weakest month of the year for the FTSE 100 Index relative to the S&P 500 Index; on average the UK index under-performs the US by 1.9 percentage points in May.


Over the last ten years, strong sectors relative to the general market in May tend to be Aerospace & Defense, Electricity and Food Producers; while the weaker sectors are: General Industrials and Life Insurance.

Article first appeared in Money Observer

Further articles on the market in May.

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Sell in May (update)

An update on the Sell in May Effect (also called the Six-Month Effect, or Halloween Effect in the US).

In the six months Nov 2015 to Apr 2016 (Winter period) the FTSE All-Share Index fell 1.8%. Previously, the Index had fallen 7.3% over May 2015 to Oct 2015 (Summer period).

The outperformance of the Winter market over the Summer market was therefore 5.5 percentage points, which supports the Sell in May Effect.

The following chart shows the outperformance of the FTSE All-Share Index in the Winter period over the previous Summer period since 1982.

SIM Outperformance of winter over previous summer market [1982-2016]

In the 16 years since 2000 the Winter market has outperformed the previous Summer market 11 times, with an average outperformance of 5.2 percentage points.

Other articles on the Sell in May Effect.

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Bounceback portfolio 2016

The Bounceback Portfolio invests in the 10 worst performing FTSE 350 stocks of the previous year and holds them for the 3-month period, January-March. 

Performance in 2016

The following table lists the ten worst performing FTSE 350 stocks in 2015. These ten stocks form the 2016 Bounceback Portfolio.

Company TIDM 2015 2016 (Jan-Mar)
Anglo American -75.1 84.4
Glencore -69.7 73.9
KAZ Minerals -60.3 66.7
Tullow Oil -60.0 18.8
Evraz -52.6 22.9
Vedanta Resources -52.1 24.6
Home Retail Group -52.0 66.6
Amec Foster Wheeler -49.7 4.9
Drax Group -46.9 11.3
Weir Group -46.0 10.8
FTSE 350 -2.8 -1.4

The final column in the above table also gives the returns for each stock for the period Jan-Mar 2016. For example, Anglo American shares fell 75.1% in 2015, and then rose (bounced back) 84.4% in the first three months of 2016.

The performance of the 10 Bounceback Portfolio stocks for Jan-Mar 2016 is shown in the following chart.

Bounceback portfolio 2016

On average the Bounceback Portfolio stocks had a 3-month return of 38.5%, compared with a FTSE 350 Index return of -1.4% for the same period.

Bounceback portfolio performance 2003-2016

The Bounceback Portfolio has been running since 2003. The following chart shows the comparative performance of the portfolio and the FTSE 350 Index for each year.

Bounceback portfolio v FTSE 350 [2003-2016]

As can be seen the Bounceback Portfolio scored its greatest out-performance of the FTSE 350 in 2016.

Since 2003, the Bounceback Portfolio has under-performed the index only twice (2013 and 2015).

The following chart shows the cumulative performance of the portfolio from 2003.

Bounceback portfolio cumulative performance [2003-2016]


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International markets 2016 1Q

The following charts plot the performance of a selection of world markets in the first quarter 2016. 

Domestic currency

International markets 2016 1Q


The returns are GBP-adjusted (i.e. these are returns for a GB poundinvestor).

International markets 2016 1Q [GBP]


The returns are USD-adjusted (i.e. these are returns for a US dollar investor).

International markets 2016 1Q [USD]


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UK sector indices 2016 1Q

The following chart plots the performance of UK FTSE 350 sector indices for the first quarter 2016.

UK sector indices 2016 1Q

The data for the chart is given in the following table.

Sector Rtn(%)
Aerospace & Defense 3.8
Automobiles & Parts -6.4
Banks -18.5
Beverages 2.7
Chemicals 1.9
Construction & Materials -1.2
Electricity -1.5
Electronic & Electrical Equipment 2.2
Equity Investment Instruments -2.8
Financial Services -4.9
Fixed Line Telecommunications -5.8
Food & Drug Retailers 17.7
Food Producers 0.2
Forestry & Paper 0.2
Gas, Water & Multiutilities 3.4
General Industrials 5.4
General Retailers -7.9
Health Care Equipment & Services -2.2
Household Goods & Home Construction 1.6
Industrial Engineering 10.3
Industrial Metals 22.9
Industrial Transportation 6.8
Life Insurance -10.4
Media 1.4
Mining 22.5
Mobile Telecommunications -1.0
Nonlife Insurance 2.0
Oil & Gas Producers 8.1
Oil Equipment, Services & Distribution 7.0
Personal Goods 7.9
Pharmaceuticals & Biotechnology -7.0
Real Estate Investment & Services -12.4
Real Estate Investment Trusts -7.0
Software & Computer Services 2.6
Support Services -2.3
Technology Hardware & Equipment -1.8
Tobacco 8.2
Travel & Leisure -5.2


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UK equity indices returns 2016 1Q

The following chart plots the performance of UK equity indices in the first quarter 2016.

UK equity indices 2016 1Q
The data for the chart is given in the following table.

Index Rtn(%)
FTSE 100 Index – Total Return 0.1
FTSE All-Share – Total Return -0.4
FTSE UK Dividend Plus -0.9
FTSE 100 -1.1
FTSE Fledgling -1.2
FTSE 350 -1.4
FTSE All-Share -1.4
FTSE SmallCap -2.0
FTSE4Good UK -2.6
FTSE4Good UK 50 -2.9
FTSE 250 -2.9
FTSE AIM All-Share -3.8
FTSE TechMARK Focus Index -3.8
FTSE TechMARK All Share -4.0
FTSE AIM 100 -5.2


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The Stock Market in April

April – one of the most exciting months for investors! Five years ago April was the strongest month for the stock market in the year, but it now ranks second behind December. The two months have been switching first and second places for quite a few years now. For the last few years it has been December, but April is not far behind. Interestingly, this characteristic is not unique to the UK market; a study of 70 markets worldwide found that the strongest months for shares were (in descending order) December, January and April.

Monthly returns of FTSE All Share Index - April (1984-2015)

On average the market rises 1.8% in this month; and the probability of a positive return in the month is 71%. Since 2003 the market has only fallen three times in April; although this doesn’t match the earlier performance: from 1971 the market rose in April every year for 15 years – a recent record for any month.

As can be seen in the chart, the strength of the market in April has been fairly constant since 1984 apart from in a few years.

The market often gets off to a strong start in the month – the first trading day of April is the second strongest first trading day of all months in the year. The market then tends to be fairly flat for the middle two weeks and then rising strongly in the final week.

FTSE 100 v S&P 500

This is the strongest month for the FTSE 100 relative to the S&P 500 (in sterling terms), the former out-performs the latter by an average of 1.3 percentage points in April (in 2015 the FTSE 100 out-performed the US index by 5.1 percentage points).

April also often sees strong performances by sterling against the dollar and oil.

The seasonality significance of April is that it the last month in the strong part of the six-month cycle (November-April), that is a feature of the Sell in May Effect (called the Halloween Effect in the US). Therefore investors may be reducing their exposure to equities ahead of May.


In the diary this month we have US Nonfarm payroll on the 1st, MPC interest rate announcement on the 6th, and the two-day FOMC meeting start on the 26th.

Anniversary-wise, 40 years ago this month in 1976 the first Apple computer, the Apple I, was released. In the same month James Callaghan was elected prime minister and long-end  gilt yields were 15%.

Article first appeared in Money Observer

Further articles on the market in April.

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FTSE 100 and FTSE 250 Quarterly Review – March 2016

After market close on 2 March 2016 FTSE Russell confirmed the following changes to the FTSE 100 and FTSE 250 indices. The changes will be implemented at the close Friday, 18 March 2016 and take effect from the start of trading on Monday, 21 March 2016.

FTSE 100

Joining: Informa [INF], Mediclinic International [MDC], Morrison (Wm) Supermarkets [MRW] and Paddy Power Betfair [PPB]

Leaving: Aberdeen Asset Management [ADN], Hikma Pharmaceuticals [HIK], Smiths Group [SMIN] and Sports Direct International [SPD]

FTSE 250

Joining: Kaz Minerals [KAZ], McCarthy & Stone [MCS], Paysafe Group [PAYS], Softcat [SCT]

Leaving: 888 Holdings [888], Enterprise Inns [ETI], Nostrum Oil & Gas [NOG], Poundland Group [PLND]

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The Stock Market in March

So, March. The beginning of spring. What can we expect from the stock market in this month? Historically, the average market return for the month has been 0.5%, and in 18 of those 31 years (59%) the month’s returns have been positive (although ­ as can be seen in the accompanying chart ­ the recent record has been weak: down four of the past years). This record ranks March seventh in the performance ranking of calendar months for the market.

Monthly returns of FTSE All Share Index - February (1984-2015)


The average March

The general trend for the market in March is to rise for the first three weeks and then fall back in the final week – the last week of March has historically been one of the weakest weeks for the market in the whole year.

Mid-cap v large-cap stocks

But the month tends to be good for medium-cap stocks ­ at least relative to large caps. March marks the final month of the three-month period when the FTSE 250 strongly out-performs the FTSE 100 (in March on average the FTSE 250 has out-performed the FTSE 100 by 0.9 percentage points).


The sectors that tend to be strong in March are: Aerospace & Defense, Financial Services, General Retailers, Industrial Engineering, and Oil & Gas Producers, Oil Equipment. While weak sectors have been: Gas, Water & Multiutilities, Health Care Equipment & Services, and Nonlife Insurance.

Aside from stocks, March has often been a weak month for gold and a strong month for oil.

FTSE 100 quarterly index review

The results of the quarterly FTSE 100 index review will be announced on the 4th; it’s difficult to predict these things too far in advance, but at the time of writing Sports Direct looks a candidate to be booted out and replaced by Rexam.


On the economics front this month we have the nonfarm payroll report on the 4th and the FOMC interest rate announcement on the 16th. It’s triple witching on the 18h, so be on the lookout for increased volatility on that day.

And it’s Easter on the 27th so the LSE will be closed on the 25th (Good Friday) and 28th (Easter Monday). A famous anomaly in stock markets is that prices tend to be strong on the day preceding and the day following a holiday. This effect is strongest in the year around the Easter holiday.

Finally, maths geeks will be celebrating Pi Day on the 14th (in the American format the date is 3/14).

Article first appeared in Money Observer

Further articles on the market in March.

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S&P 500 daily returns heatmap

This updates a previous article with the latest figures for the average daily change and positive daily returns of the S&P 500.

The table formatting and analysis is largely as before; except the charts now use a smoother gradient of colours to indicate number magnitude.

Average daily returns

S&P 500 average daily returns heat map [2015]

Positive daily returns

Other daily return heatmaps.


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