2015 1Q market review – international markets

Equity and commodity markets

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

2015 1Q International market returns

Notes

  1. The Euro markets, Germany, Italy, France and Netherlands, dominate the top of the performance chart this last quater.
  2. At the bottom are the commodities (gold, oill and platinum), and US stocks.

Currency markets

The following chart shows a sample of currency moves against the British pound in 2015 1Q. For example, the British pound strengthened 14.5% against the Brazilean Real, and fell 8.8% against the Russian Ruble.

2015 1Q Pound sterling performance b

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). The order of the markets has been kept the same as in the first chart, to highlight the effect of the currency moves.

2015 1Q International market returns (GBP)

Notes

  1. Over the first quarter sterling strengthened against the Euro (thus diminishing the effective returns from Euro markets), and weakened against the US dollar.
  2. A major positive impact for UK investors was the weakness of sterling against the ruble which boosted returns on Russian equity exposure.
  3. Conversely, the weakness of the Brazilian Real  acted to reduce returns on Brazil equities.
  4. While oil fell 4.0% in dollar terms in the quarter, UK investors saw a small positive return of 0.8%.

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 1Q International market returns (USD)

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2015 1Q market review – comparative performance of UK equity indices

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

UK indices comparative returns 2015 1Q

The relative performance was fairly typical for a first quarter (e.g. 2014 1Q). For example, small and mid-caps (e.g. FTSE Fledgling, FTSE 250 and FTSE SmallCap) greatly outperformed the large caps (FTSE 100).

Data

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

Index 2015 1Q Rtn(%)
FTSE Fledgling 7.4
FTSE TechMARK Focus Index 7.3
FTSE 250 6.2
FTSE TechMARK All Share 6.1
FTSE UK Dividend Plus 6.1
FTSE SmallCap 5.3
FTSE AIM 100 4.8
FTSE All-Share – Total Return 4.7
FTSE 100 Index – Total Return 4.2
FTSE All-Share 3.7
FTSE4Good UK 3.7
FTSE 350 3.6
FTSE 100 3.2
FTSE4Good UK 50 3.0
FTSE AIM All-Share 2.0

 

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The Stock Market in April

April is one of the most interesting months for investors.

Why?

Let’s start with the fact that for the past decades the two stand-out strong months for the market have been April and December – the two have been switching back and forth as the single strongest month. For the last few years it has been December, but April is not far behind. Incidentally, 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 (1984-2014)

The average April

On average the stock market rises 1.8% in this month; and the probability of a positive return in the month is 70%. As can be seen in the accompanying chart, 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).

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.

End of the Sell-in-May strong six-month period

The great seasonality significance of April is that it the last month in the strong part of the six-month cycle (November-April); and therefore investors may be reducing their exposure to equities ahead of May.

FTSE 100 v S&P 500

Although over the last few decades the US market has greatly out-performed the UK, the FTSE 100 Index has had a tendency to out-perform the S&P 500 Index in certain months. April is one of those months; in fact, this month is the strongest month for the FTSE 100 relative to the S&P 500 – the former out-performs the latter by an average of 1.2 percentage points in April.

Diary

This month is very quiet for company announcement: only five FTSE 100 companies and 11 FTSE 250 companies announce interims or finals this month.

On the economics front, there will be the US Nonfarm payroll report on the 2nd, the MPC interest rate announcement on the 9th and the FOMC meetings starts the 28th. Easter occurs early this year falling on the 5th; with the LSE closed on the 3rd and 6th. Apart from the days off, is Easter of interest to investors? Well, it could be. Academic studies have shown that markets tend to be strong on the day immediately before a holiday and the day following a holiday – and this effect is strongest around Easter.


Article first appeared in Money Observer

Further articles on the market in April.

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Shares that like/dislike April

Shares that like April

The following table lists the five FTSE 350 shares that have the best returns in April over the last ten years. For example, Fenner has an average return of 9.11% for the month of April. All stocks have risen in April for at least eight of the past ten years.

Company TIDM Avg(%)
Fenner 9.1
Royal Dutch Shell 5.4
Aberdeen Asset Management 4.6
Severn Trent 3.9
SABMiller 3.6

Shares that dislike April

The following table lists the four FTSE 350 shares that have the worst returns in April over the last ten years. For example, Balfour Beatty has an average return of -4.4% for the month of April. All four stocks have fallen in at least eight of the past ten years in April.

Company TIDM Avg(%)
Balfour Beatty -4.4
Reed Elsevier -2.3
BAE Systems -1.6
UNITE Group 0.6

An equally-weighted portfolio of the above strong April stocks would have out-performed every year an equally-weighted portfolio of the above weak April stocks by an average of 7.3 percentage points in April for the past ten years.

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Last trading day of March

Tomorrow will be the last trading day (LTD) of March.

Since 1984 the market has on average risen 0.11% on the LTD of March, with positive returns in just 50% of all years, which makes it the sixth strongest LTD of any month in the year.

The following chart shows the FTSE 100 Index returns for every March LTD since 1984.

Last trading day of March (1984-2014) [2015]

 

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S&P 500 daily returns heatmap

This article concerns the daily returns for the S&P 500 Index from 1950.

Average daily returns

The following table shows the average return since 1950 of the S&P 500 Index for each day of the year. For example, over the last 65 years the average daily return for the S&P 500 Index on 2 January has been 0.29%.

In the table, positive average daily returns are coloured green, while negative average returns are coloured red. Daily returns are highlighted dark green (red) for large positive (negative) returns. (See below for the definition of large.)

Average daily returns heatmap - S&P 500

Observations:

  • The day with the greatest number of large positive average returns is the 1st of the month followed by the 15th.
  • Two days of the month, 7th and 8th, have no large positive average returns.
  • The month with the greatest number of large positive average daily returns is Novermber, while February and June have none at all.
  • There appears to be a concentration of large negative average daily returns from the 20th to 25th of months.
  • The longest period of the year with no large negative average daily returns is 15 Dec to 7 Jan.
  • The month with the greatest number of large negative average daily returns is September.

Positive daily returns

The following chart is similar to the above, except this shows the proportion of positive returns for each day of the year. For example, since 1950 61% of the S&P 500 Index returns on 2 January have been positive.

Positive daily returns heatmap - S&P 500

Definition of large

Values are highlighted as large if they are more than 1 standard deviation from the average. For example, for the daily returns in the first chart the average daily return (for all days) is 0.04% and the standard deviation 0.16, so values are highlighted if they are above 0.20% (0.04 + 0.16) or below -0.12% (0.04 – 0.16).

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FTSE 100 and FTSE 250 Quarterly Review – March 2015

After the close on 4 March 2015 the FTSE Group confimed the following changes to the FTSE 100 and FTSE 250 indices. The changes will be implemented at the close Friday, 20 March 2015 and take effect from the start of trading on Monday, 23 March 2015.

FTSE 100

Joining: Hikma Pharmaceuticals

Leaving: Tullow Oil

FTSE 250

Joining: AA, Imagination Technologies Group, Virgin Money Holdings

Leaving: Afren, Game Digital, Oxford Instruments

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Be a John, but buy Michael

An article in yesterday’s New York Times observed that,

Among chief executives of S.&P. 1500 firms, for each woman, there are four men named John, Robert, William or James.

What is the situation like in the UK? We don’t have up to date analysis, but below we quote some analysis that appeared in the 2007 edition of the The UK Stock Market Almanac.


What are the predominant christian names of the Chairmen, CEOs, and CFOs of FTSE 100 companies?

The following table shows the frequency of first names of the three major officers in all the FTSE 100 companies.

FistName Chairman CEO CFO Total
John 17 7 6 30
David 3 3 8 14
Philip 2 5 4 11
Michael 4 4 3 11
Andrew 0 3 7 10
Paul 1 4 3 8
Richard 2 3 3 8
Robert 6 0 2 8
Richard 2 3 3 8
Peter 5 0 2 7
Martin 2 2 3 7
Mark 0 1 4 5
Simon 1 1 3 5
Stephen 0 2 3 5

The lesson seems to be: if you want to run a FTSE 100 company, be called John or think of changing your name to John. 17 Chairmen and 7 CEOs of FTSE 100 companies have the first name John. The second most popular name is David.

It’s interesting to note how first names differ between the three roles. Apart from John, Robert and Peter are popular names for Chairmen, Philip is popular with CEOs, and David and Andrew are common for Chief Financial Officers.

What does this tell us?

Probably not very much.

The charts below, however, may give some guidance for investors.

Portfolio of FTSE 100 CEOs named John

 

Portfolio of FTSE 100 CEOs named Philip

The first chart plots the performance of a portfolio comprised of those FTSE 100 companies whose CEO’s first name is Michael. The second chart is similar, except the CEO’s name is Philip.

The result: Michael out-performs Philip by a wide margin.

Recommendation: buy Michael, sell Philip.

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Strong/weak sectors in March

Strong sectors

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

Sector TIDM
General Industrials
General Retailers
Industrial Engineering
Oil & Gas Producers
Oil Equipment, Services & Distribution

Weak sectors

The following table lists the sectors that have been weak in March.

Sector TIDM
Gas, Water & Multiutilities
Health Care Equipment & Services
Nonlife Insurance

 

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The Stock Market in March

Today is the first trading day of March.

Since 1984 the UK stock market has had an average return in March of 0.5%; and in 18 of those 31 years (59%) the month’s returns have been positive. This places March seventh in the performance ranking of calendar months for the market. With this the UK is inline with international markets: March ranks 6th on average for 70 world markets (although it has the distinction – along with November – of not being the strongest month for any of the 70 world markets).

However, in recent years share price performance in March has deteriorated. Such that since year 2000 the average month return has slipped to 0.3%, and – as can be seen from the accompanying chart – the market has fallen more often than risen this month. Last year the market fell 3% in March.

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

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.

One characteristic of the early part of the year is that medium cap stocks tend to strongly out-perform large caps. March marks the final month of this period: on average the FTSE 250 index has out-performed the FTSE 100 Index by 0.9 percentage points this month.

Shares

In the last ten years the FTSE 350 shares that have been strong in March have been: Berendsen, Cobham, Intertek Group, Restaurant Group, and Victrex; while The shares that don’t seem to like March are: HSBC, PZ Cussons, Renishaw, Royal Bank of Scotland, and Smiths Group. And it could also be noted that gold has historically been weak in March.

Diary

This is another busy month for company announcements: the busiest for FTSE 250 companies in the year with 74 companies announcing their prelims this month (along with 29 FTSE 100 companies).

The results of the quarterly FTSE 100 index review will be announced on the 4th. Elsewhere, there will be the MPC interest rate announcement on the 5th, the Chancellor’s Budget on the 18th, the FOMC announcement on the 17th, and it’s triple witching on the 20th, so be on the lookout for increased volatility on that day.


Article first appeared in Money Observer

Further articles on the market in March.

 

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