The Stock Market in August

Five years ago August was ranked the 5th strongest month in the year, but it has now slipped to 8th position. The average return in the month is 0.5%, while the probability of a positive return in August is 57%. As can be seen in the accompanying chart, there have been some nasty surprises in August – notably with large falls of over 7% in 1998 and 2011. Last year the market rose 1.5% in August.

Monthly returns of FTSE All Share Index - August (1984-2014)

Generally the volatility of stock returns for August is around the median for all months – certainly significantly below the high-volatility months of January, September and October.

The average August

In an average month for August the market tends to drift lower for the first couple of weeks and then increase for the final two weeks of the month. The final trading day of the month has historically been strong.

Internationally, August is not a good month for equities; August has the second lowest average monthly returns for 70 world equity markets. In domestic currency terms, August is the strongest month of the year for the FTSE 100 relative to the S&P 500, but after factoring in (the historically weak) GBPUSD rate much of that out-performance disappears.

Sectors

The sectors which tend to be strong in August are Food & Drug Retailers, Gas, Water & Multiutilities, Health Care Equipment & Services and Household Goods; while the only predominantly weak sector is Chemicals.

Shares

At the stock level, the five strongest FTSE 350 companies in August have recently been Fisher (James) & Sons [FSJ], Melrose Industries [MRO], Tullett Prebon [TLPR], Keller Group [KLR], and Bunzl [BNZL]. Fisher (James) is the only FTSE 350 company whose shares have risen every August in the past ten years; the other four shares have all risen in nine of the past ten years in August. Three weak August stocks are Xaar [XAR], Rio Tinto [RIO], and Standard Chartered [STAN], all of which have fallen in August in nine of the past ten years.

Diary

August is the busiest month for FTSE 100 and FTSE 250 interim results announcements: 40 FTSE 100 companies and 87 FTSE 250 companies announce their interims this months. So, not a good month for analysts to take a holiday.

Significant dates this month are: the MPC interest rate announcement on the 6th, US Nonfarm payroll report on the 7th, the MSCI quarterly index review announcement on the 13th, and the LSE is closed on the 31st (Summer bank Holiday).


Article first appeared in Money Observer

Further articles on the market in August.

 

Social Share Toolbar

2Q 2015 UK equity markets performance

The following chart shows the performance of the main UK stock market indices in the second quarter 2015.

2015 2Q UK equity markets returns

As in the first quarter, small caps easily out-performed large caps.

Data

The data for the above chart is shown in the following table.

Index 2Q 2015 Rtn(%)
FTSE Fledgling 7.7
FTSE AIM All-Share 5.5
FTSE AIM 100 4.8
FTSE 250 2.6
FTSE SmallCap 1.7
FTSE TechMARK Focus Index 0.1
FTSE All-Share – Total Return -1.6
FTSE UK Dividend Plus -1.7
FTSE TechMARK All Share -1.9
FTSE All-Share -2.5
FTSE 350 -2.7
FTSE 100 Index – Total Return -2.8
FTSE4Good UK -2.9
FTSE 100 -3.7
FTSE4Good UK 50 -4.0

1H 2015

The following chart shows the performance of the main UK stock market indices in the first half of 2015.

2015 1H UK equity markets returns

 

Social Share Toolbar

Strong/weak sectors in July

Strong sectors

The table below lists the sectors that have historically out-performed the market in July.

Sector TIDM
Chemicals
Personal Goods
Real Estate Investment Trusts
Technology Hardware & Equipment

Weak sectors

The table below lists the sectors that have historically under-performed the market in July.

Sector TIDM
Beverages
Gas, Water & Multiutilities
Industrial Transportation
Support Services

 

Social Share Toolbar

2015 2Q performance – international markets

Equity and commodity markets

The following chart shows the returns on a range of international stock markets and commodities in the second quarter of 2015.

2015 2Q International market returns

NOTES

  1. The Euro markets, Germany, Italy, France and Netherlands, after a strong first quarter all saw negative returns in the second quarter.
  2. Apart from India, a strong quarter for the BRICs.
  3. A weak quarter for metals.
  4. Despite falling back steadily in May and June, the strongest performer here was Brent Oil on the back of a very strong April.

Currency markets

The following chart shows a sample of currency moves against the British pound in 2Q 2015. For example, the British pound strengthened 5.8% against the US Dollar, and 1.0% against the Russian Ruble.

2015 2Q Pound sterling performance

As can be seen, in the last quarter sterling strengthened against all currencies in this sample.

Equity and commodity markets (sterling)

The following chart shows the returns on the same markets as in the first chart, but this time in sterling terms (i.e. showing the currency-adjusted returns for a UK investor).

2015 2Q International market returns (GBP)

NOTES

  1. Over the second quarter UK investors saw their returns on international markets pared back due to the strength of sterling. (In fact, of the 22 sample markets here, UK investors would have seen positive returns in only four.)

Equity and commodity markets (dollar)

The following chart shows the returns on the same markets as in the first chart, but this time in US dollar terms (i.e. showing the currency-adjusted returns for a US investor).

2015 2Q International market returns (USD)

Social Share Toolbar

The Stock Market in July

Share prices in July have historically started to recover some of their bounce after the weak months of May and June. On average the stock market increases 1.0% in July, with a probability of a positive return in the month of 57%. This makes July the fifth strongest month of the year for shares. In recent years the market has been unusually strong: as can be seen from the accompanying chart the market has risen over 6% in the month three times in the past six years.

Monthly returns of FTSE All Share Index - July (1984-2014)

The average July

The start of the month tends to be strong: the first trading day (FTD) is one of the strongest FTDs for any month in the year, and the first week of the month is among the top ten strongest weeks in the year. After that, the market has a propensity to drift lower for a couple of weeks until finishing strongly in the final week of the month.

July is one of only three months (the others being September and October) where the FTSE 100 tends to out-perform the mid-cap FTSE 250, although the out-performance in July is not significantly large. Better is the performance of the FTSE 100 relative to the S&P 500, in sterling terms July is the second best month for the FTSE 100.

Sectors

Although this may not be the most exciting month for the overall market, there can be a fair degree of divergence of performance at the sector level. Historically the sectors that have been strong in July are Chemicals, Personal Goods and Real Estate Investment Trusts while weak sectors have been Gas, Water & Multiutilities, Support Services and Beverages.

Shares

At the stock level, the five strongest FTSE 350 companies in July have recently been Elementis, Brown Group, Greene King, Shire, and Land Securities Group; all five shares have risen in July in nine of the past ten years. Two weak July stocks are IP Group and SSE.

July is a busy month for companies announcing their interim results: 23 FTSE 100 companies will be doing so, and 44 FTSE 250 companies.

Diary

On the economics front: there is the US Nonfarm payroll report on the 2nd, the MPC interest rate announcement on the 9th, the, and the two-day FOMC meeting starts on the 28th. And the New York Stock Exchange will be closed on 3rd July.


Article first appeared in Money Observer

Further articles on the market in July.

 

Social Share Toolbar

Shares that like/dislike July

Shares that like July

The following table lists the five FTSE 350 shares that have the best returns in July over the last ten years. For example, Elementis has an average return of 7.6% for the month of July. All stocks have risen in July for at least nine of the past ten years.

Company TIDM Avg(%)
Elementis 7.6
Brown (N) Group 6.9
Greene King 6.8
Shire 6.0
Land Securities Group 5.1

 Shares that dislike July

The following table lists the two FTSE 350 shares that have the worst returns in July over the last ten years. For example, IP Group has an average return of -4.1% for the month of July. Both stocks have fallen in at least seven of the past ten years in July.

Company TIDM Avg(%)
IP Group -4.1
SSE -2.0

An equally-weighted portfolio of the above strong July stocks would have out-performed every year an equally-weighted portfolio of the above weak July stocks by an average of 9.3 percentage points in July for the past ten years.

Social Share Toolbar

Average market behaviour in July (2015)

The following chart plots the average performance of the FTSE 100 Index during July since 1984.

Average month chart - July (2015)

As can be seen, historically the market tends to rise for the first week, is flat for the following two weeks, falls in the fourth week, but then ends strongly in the final few days.

Social Share Toolbar

FTSE 100 and FTSE 250 Quarterly Review – June 2015

After the close on 3 June 2015 FTSE Russell confirmed the following changes to the FTSE 100 and FTSE 250 indices. The changes will be implemented at the close Friday, 19 June 2015 and take effect from the start of trading on Monday, 22 June 2015.

FTSE 100

Joining: Inmarsat

Leaving: Aggreko

FTSE 250

Joining: Aldermore Group, Auto Trader Group, B&M European Value Retail, John Laing Group, Onesavings Bank, Shawbrook Group, Wizz Air Holdings, Woodford Patient Capital

Leaving: BlackRock World Mining Trust, De La Rue, Imagination Technologies Group, Infinis Energy, Law Debenture Corp, Personal Assets Trust, RPS Group, Soco International

Social Share Toolbar

Strong/weak sectors in June

Strong sectors

The table below lists the sectors that have historically out-performed the market in June.

Sector TIDM
Beverages
Oil & Gas Producers
Pharmaceuticals & Biotechnology

Weak sectors

There are no sectors that have been consistently weak in June.

 

 

Social Share Toolbar

The Stock Market in June

While the temperature may be rising in June, this is not usually the case for share prices. Generally, the market in June is even weaker than it is in May – making this a rather dismal period of the year for investors.

On average the market has fallen 0.9% in June; and the probability of a positive return in the month is a lowly 39% – which ranks it 11th of all months in the year. Since year 2000 the situation has been even worse: the average return in the month has been -1.7%; the market has only risen one June in the past eight years. And, as can be seen in the accompanying chart, the market falls in June can be quite large; the market has fallen over 3% in June in eight years since 1982.

Monthly returns of FTSE All Share Index - June (1984-2014)

The average June

In an average June the market starts strong, hitting its month high on the second or third trading day, but prices then drift down steadily for the rest of the month.

Shares

Despite the general market weakness, June has been good for the shares of Synergy Health and Ted Baker – the two strongest FTSE 350 stocks over the last ten years in this month. In fact, Synergy Health has had positive returns for June every year for the past ten. By contrast, the five weakest stocks in June have been: Barclays, Travis Perkins, Bodycote, Schroders and Morrison Supermarkets – all of which have fallen in June in nine of the past ten years. An equally-weighted portfolio of the two strong stocks would have out-performed an equally-weighted portfolio of the five weak stocks by an average of 12.4 percentage points each June.

Sectors

At the sector level, three sectors have been historically strong this month: Beverages, Oil & Gas Producers and Pharmaceuticals & Biotechnology; while there have been no sectors that have been consistently weak.

Diary

June is the quietest month for results from FTSE 100 companies – just two companies making announcements this month. So an easy month for analysts!

This is quite a busy month on the economics front: there is the MPC interest rate announcement on the 4th, the US Nonfarm payroll report on the 5th, and the two-day FOMC meeting starts on the 16th. Triple Witching is on the 19th.

Finally, note that the FTSE 100 quarterly index review announcement will be made on the 4th. At the time of writing the stock most likely to be ejected from the FTSE 100 Index is Sports Direct International, to be replaced by Inmarsat.


Article first appeared in Money Observer

Further articles on the market in June.

Social Share Toolbar