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.

 

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