February is currently on something of a roll. Since 2009 the market has been up every year in February. This is a far better record than any other month of the year. And, further, since 1994 the market has only seen significant negative returns in three years. Since 1970 the average return of the FTSE All-Share Index in February has been 1.6%, with the month seeing positive returns in 63% of years. There’s no obvious reason why the market has been so strong in recent years in this month; although one possible explication might be that, also in recent years, shares have been weak in January and so they experience a bounce back rally in February.
In an average February the market tends to rise for the first two-and-a-half weeks and then drifts lower for the rest of the month.
Mid-cap v large-cap
A feature of February is that, with January, it is the best month for mid-cap stocks relative to the large caps. Since 2000 on average the FTSE 250 Index has out-performed the FTSE 100 Index by 1.7 percentage points in this month.
FTSE 100 v S&P 500
On the international front, February is one of the four months in the year that the FTSE 100 Index has historically out-performed the S&P 500 Index, although the out-performance is attenuated once currency is taken into account as GBPUSD is historically weak in February.
The strong sectors in February tend to be Chemicals, Construction & Materials, General Retailers, Household Goods, Mining, and Oil Equipment; while the weak sectors are Electronic & Electrical Equipment, Financial Services, and Technology Hardware & Equipment.
And it’s a busy month for analysts as there are more FTSE 100 results announced during the month than any other 39 companies announce their prelims in February (as do 56 FTSE 250 companies).
Aside from shares historically this has been a strong month for gold and silver.
Dates to note this February are: 4 Feb MPC interest rate announcement at 12 noon, 5 Feb US Nonfarm payroll report, and 16 Feb President’s Day (when the will be NYSE closed). The 15th of the month will see the 10th anniversary of the controversial flotation of QinetiQ. And, finally, 8 February is the Chinese New Year; this new year will be the year of the monkey. Since 1950 the average return in monkey years has been 7.3%.
Article first appeared in Money Observer
Further articles on the market in February.