FTSE 100 and FTSE 250 Quarterly Review – December 2017

After market close on 29 November 2017 FTSE Russell confirmed the following changes to the FTSE 100 and FTSE 250 indices. The changes will be implemented at the close Friday, 15 December 2017 and take effect from the start of trading on Monday, 18 December 2017.

FTSE 100

Joining: Smith (DS) [SMDS], Just Eat [JE.], Halma [HLMA]

Leaving: ConvaTec Group [CTEC], Merlin Entertainments [MERL], Babcock International Group [BAB]

FTSE 250

Joining: BCA Marketplace [BCA], F&C Global Smaller Companies [FCS], Purecircle [PURE], RHI Magnesita [RHIM], TI Fluid Systems [TIFS]

Leaving: Electra Private Equity [ELTA], Nostrum Oil & Gas [NOG], PayPoint [PAY], P2P Global Investments [P2P], Restaurant Group [RTN]

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The Stock Market in December

Since 1970 December and April have been the best two months of the year for shares. Since that year the FTSE All-Share Index has risen in December in 74% of all years and the average month return has been 2.1%. In addition, the volatility of December returns is significantly less than any other month.

As can be seen in the accompanying chart the market has only fallen in December in six years since 1984. But two of those negative-return Decembers were very recent: in 2014 and 2015. Which might have led one to wonder if the stellar record of December for shares was ending. However, last year, in 2016, the strength of the market in December reasserted itself when the FTSE All-Share Index rose 4.9% in the month.

Monthly returns of FTSE All Share Index - December (1984-2016)

However, the solid performance of the market in December is only part of a wider trend, namely that from the end of October shares tend to be strong through to the end of the year. This is a result of the Sell in May effect (aka Halloween effect), where equities are relatively strong over the six-month period November – April. So, the market does have a fair following wind at this time of the year, and then in December shares often become super-charged.

The average December

In an average December, shares have in fact tended to be weak in the first couple of weeks of the month, but then around the tenth trading day shares charge upwards. The last two weeks of December is the strongest two-week period of the whole year (and is often referred to as the Santa Rally), and the three days with the highest average daily returns in the year all occur in this two-week period.


While December has been a good month for capital gains, it’s the worst month for income investors with only five FTSE 100 companies paying interim or final dividend payments in the month.


The FTSE 350 sectors that have tended to be strong in December are: Electronic & Electrical Equipment, Construction & Materials, and Media; while the weak sectors are: Banks, General Retailers, and Fixed Line Telecommunications.


Dates to watch this month are: 5 Dec ­ FTSE index quarterly reviews announced, 7 Dec – US Nonfarm payroll report, 19 Dec – FOMC announcement on interest rates, 20 Dec – MPC interest rate announcement, 21 Dec – Triple Witching. And note that the London Stock Exchange will close early at 12h30 on the 22nd and will be closed all day on the 25th and 26th.

Article first appeared in Money Observer

Further articles on the market in December.

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Gold seasonality

Does the price of gold exhibit a monthly seasonality?

[Here we update our previous analysis of gold seasonality.]

On 17 March 1968 the system that fixed the price of gold at USD35.00 collapsed and the price of gold was allowed to fluctuate. Let’s have a quick look at the chart to see how gold has performed since it floated in 1968.

Gold ($) [1968-2017]

Since 1968 when gold floated, its price has grown at a CAGR of 7.7%.

Let’s look now at its monthly seasonality.

The following chart plots the average price returns for gold by month since 1968. For example, since 1968 the average return of the gold price in January has been 1.2%.

Gold($) average monthly return [1968-2017]

And the following chart plots the proportion of months that have seen positive returns. For example, in 60% of years since 1968 gold has had positive returns in February.

Gold($) positive monthly return [1968-2017]

It can be seen that since 1968 gold has on average been strong in February, September and December. The weak months for gold have been March and October.

This profile of behaviour would seem to have some persistency as the same pattern can be seen for the more recent period 2000-2017, for example the following chart plots the average month returns from 2000.

Gold($) average monthly return [2000-2017]

The main new features recently have been the strength of gold in the months January, August and November, and the weakness in December.

Gold and equities

The following chart shows the ratio of the FTSE All Share Index to gold (priced in sterling) since 1968. One can regard the chart as the UK equity market priced in gold.

FTSE All-Share Index - Gold(£) [1968-2017]

The ratio peaked at 18.8 in July 99 and then fell to a low of 2.3 in September 2011. Since 1968 the ratio average is 6.1

Almanac cover - 2018 (small 2)

The above is an extract from the newly published UK Stock Market Almanac 2018.

Order your copy now!

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Analysis of the relationship between the closing level of the market and the hi-lo range during the day

The chart below shows the frequency with which the index closes near to the high (or low) of the day. The data analysed is FTSE 100 Index daily data since 1985. The analysis first takes the day’s hi-lo range, and then calculates three threshold levels (1%, 5%, and 10%).

For example, if a day’s low is 50 and high is 70, then the Hi-Lo range would be 20. And the 1%, 5%, and 10% thresholds would 0.2, 1 and 2. The day would be said to close within 10% low of the day if the closing price was below 52. The day would be said to close within 5% of the high if the closing value was above 69.

For example, since 1985 the FTSE 100 Index has closed within 10% of its daily high on 20.8% of all days, and it has closed within 1% of its low 5.6% of all days.

Frequency of FTSE 100 Index closing near high or low of the day

An obvious observation to make is that the Index closes more often near its high of the day than the low. In nearly 1 in 10 days the index closes within 1% of the high of the day.

The effect on returns the following day

Continuing this analysis of where the index closes relative to the Hi-Lo range of the day, the following chart shows the performance of the FTSE 100 Index on the following day, split by where the index closed the previous day relative to that day’s Hi-Lo range.

For example, on the days when the index closes within 10% of its low for the day on average the index return is -0.005% the following day; and when the index closes within 1% of its high for the day on average the index return is 0.16% the following day.

Hi-Lo-Close effect on following day returns

As can be seen, the nearer the index closes to its high of the day, the higher the following day’s return. The other striking observation is that, whereas a close near the day’s high is associated with relatively strong returns the following day, a close near the day’s low has little effect on the average return the following day.

Almanac cover - 2018 (small 2)

The above is an extract from the newly published UK Stock Market Almanac 2018.

Order your copy now!

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Market behaviour on the days around Budget Day

The United Kingdom used to have have two annual Budgets (what the UK Treasuary calls “fiscal events”), one in the Spring and the other in the Autumn. But from 2017 it is switching to having just one Budget in the year – in the Autumn. The reason is to allow major tax changes to occur annually, before the start of the fiscal year. (Further info on the new Budget timetable can be found on the Treasury web site.)

So, 2017 saw the last Spring Budget, and the Autumn Budget will take place on Wednesday 22 November 2017.

Below we look at the immediate effect of the Budget on three asset classes in the three days around Budget Day:

  1. B(-1): the day before the Budget
  2. B(0): Budget Day
  3. B(+1): the day after the Budget


The following chart plots the daily returns for the FTSE 100 Index for the three days around Budget Day for the years 2000-2017. For example, in year 2000 the Budget was on 21 March, the day before the Budget the FTSE 100 rose 1.04%, on Budget Day the index fell 0.13%, and on the day after the index fell 0.12%.

Daily returns for FTSE 100 for the three days around the Chancellor's Budget [2000-2017]


Similar to the above, the following chart plots the daily returns of GBPUSD around Budget Day from year 2000.

Daily returns for GBPUSD for the three days around the Chancellor's Budget [2000-2017]


And, finally, the performance of gilts (the 8% Treasury 2021 is taken as a representative gilt) around the budget.

Daily returns for 8 Treasury 2021 for the three days around the Chancellor's Budget [2000-2017]


The following chart shows the average returns for the period 2000-2017 for each respective asset class for the three days around the Budget.

Average returns for the three days around Chancellor's Budget [2000-2017]

And the following chart shows the proportion of positive returns for the three asset classes in three days around the Budget.

Positive returns for the three days around Chancellor's Budget [2000-2017]

On average since 2000 the equity market has seen mildly positive daily returns on the day before the Budget and on Budget Day itself. But the most significant observation is that equities have been weak on the day after the budget.

On average the pound against the dollar has seen little change on the day before the Budget and on Budget Day itself, but has been strong on the day after the budget.

While, on average, gilts have been weak for all three days, with the weakest day being the day after the Budget.

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Day of the week grid

An update of the Day of the Week grid.

This is a table showing the daily returns of the FTSE 100 Index for every day so far in 2017. Positive returns are highlighted in green, negative returns in red. (White cells indicate a market holiday.)

Day of the week grid [Nov 2017]

Pattern-match away…!

Other articles looking at returns on days of the week.

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History of Bitcoin

The chart below plots the price of Bitcoin from July 2010 to November 2017. The price on the Y-axis is plotted on a logrithmic scale (as the price has grown exponentially).

History of Bitcoin chart

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Market returns in odd and even weeks

A couple of years ago the Almanac wrote about a strange characteristic of the UK equity market which was the difference in performance in odd and even weeks. The original article is here (see the original article for the definition of odd/even weeks etc.) To recap briefly, the FTSE 100 Index saw much stronger returns in odd weeks than even weeks.

Let’s see what’s happened recently and if this strange characteristic still exists. 

The following chart shows the FTSE 100 average returns for odd and even weeks for the period 2010 to 2017, and also for the individual years 2016 and 2017 (to date). 

Average FTSE 100 returns in odd and even weeks

As can be seen, for the period from 2010 the FTSE 100 has seen on average positive returns in odd weeks and negative returns in even weeks. In effect, for the last few years in aggregate all the growth in the index has been due to its performance in odd weeks.

In 2016, the market on average did see positive returns in even weeks (albeit still less than the odd-week returns). But so far in 2017 the longer-term trend has reasserted itself, with strong odd-week returns and negative even-week returns.

The following chart updates the performance of two hypothetical portfolios: one of which only invests in the market in odd weeks, and the other only invests in even weeks.

Odd v Even Week FTSE 100 Portfolios [2010-2017]

The significant divergence in performance previously observed has continued to today. Having started with values of 100 in 2010, by November 2017 the Odd Week Portfolio would have had a value of 187, compared with a value of 75 for the Even Week Portfolio. The change in value of the Even Week Portfolio has changed little from 2015, whereas the Odd Week Portfolio has grown strongly.

As mentioned in the original article, there is no obvious reason for this weekly phenomenon, although such weekly effects have been seen elsewhere – for example, the FOMC Cycle.

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CME Bitcoin Futures Contract Specifications

The following table gives the contract specifications for the proposed cash-settled CME Bitcoin futures.

Contract Unit 5 bitcoin, as defined by the CME CF Bitcoin Reference Rate (BRR)
Minimum Price Fluctuation Outright: $5.00 per bitcoin = $25.00 per contract

Calendar Spread and Basis Trade at Index Close (BTIC): $1.00 per bitcoin = $5.00 per contract

Trading Hours CME Globex and CME ClearPort: 5:00 p.m. – 4:00 p.m. CT Sunday – Friday

BTIC: 5:00 p.m. – 10:00 a.m. or 11:00 a.m. CT (4:00 p.m. London Time) Sunday – Friday

Product Code Outright: BTC


Listing Cycle Nearest 2 months in the March Quarterly cycle (Mar, Jun, Sep, Dec) plus the nearest 2 “serial” months not in the March Quarterly cycle.

Contract months for initial listing: Dec 2017, Jan 2018, Feb 2018, Mar 2018.

Termination of Trading Last Day of Trading is the last Friday of contract month.

Trading in expiring futures terminates at 4:00 p.m. London time on Last Day of Trading.

Position Limits Spot Position Limits are set at 1,000 contracts. A position accountability level of 5,000 contracts will be applied to positions in single months outside the spot month and in all months combined.  The reportable level will be 25 contracts.
Block Minimum 5 contracts
Price Limits Price limits for a given Business Day are made by reference to the most recent Bitcoin Futures settlement price, settled at 4:00 p.m. London time each Business Day.

Special price fluctuation limits equal to 7% above and below prior settlement price and 13% above and below prior settlement price and a price limit of 20% above or below the previous settlement price. Trading will not be permitted outside the 20% above and below prior settlement price.

Settlement Cash settled by reference to Final Settlement Price, equal to the CME CF Bitcoin Reference Rate (BRR) on Last Day of Trading.

Further info on Bitcoin futures at the CME web site.

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Volatility of markets in 2017

The following chart shows the volatility of various markets so far in 2017.

Volatility In 2017

Not difficult – or surprising – to spot the most volatile market here.

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