FTSE 100 and FTSE 250 Quarterly Review – September 2018

After market close on 5 September 2018 FTSE Russell confirmed the following changes to the FTSE 100 and FTSE 250 indices. The changes will be implemented at the close Friday, 21 September 2018 and take effect from the start of trading on Monday, 24 September 2018.

FTSE 100

[no changes]

FTSE 250

Joining:

Amigo Holdings [AMGO]
Avast [AVST]
Plus500 [PLUS]
Vivo Energy [VVO]

Leaving:

Alfa Financial Software Holdings [ALFA]
Mccarthy & Stone [MCS]
RDI REIT plc [RDI]
Renewi [RWI]

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The Stock Market in September

September is often not a good month for the stock market. Since 1990 the average return of the FTSE All-Share Index in September has been -1.2%. For some time this record made September the worst month of the year for shares, but this year June has claimed the crown of worst month and September becomes just second-worst. Since year 2000, the Index performance in September has been even worse, with an average return of -1.6% in the month.

However, although the average return is bad in the month, over the longer-term about half of all Septembers actually have positive returns.

The problem is that when the market does fall in this month, the falls can be very large. For example, as can be seen in the accompanying chart, the FTSE All-Share Index has declined over 8% in three years since 2000. So, the big problem for investors in September is volatility – share price volatility is at its highest annual point in September.

Monthly returns of FTSE All Share Index - September (1984-2017)

Mid-cap stocks

The situation is even worse for mid-cap stocks. Since 2000, on average the FTSE 250 Index under-performs the FTSE 100 Index by 1.4 percentage points in September.

The average September

In an average month for September the market tends to gently drift lower for the first three weeks before rebounding slightly in the final week – although the final trading day (FTD) of the month has historically been one of the weakest FTDs of all months in the year.

In contrast to equities, gold tends to be strong in September: since 1968 the average gold price return in the month has been 1.8%, making September the second strongest month of the year for gold after February.

Sectors

On the sector front, September tends to be good for Tobacco, Nonlife Insurance, and Beverages, and relatively bad for Industrial Transportation, Real Estate Investment Trusts, Electronic & Electrical Equipment.

Companies

FTSE 350 shares that have been relatively strong in September over the last ten years are: JD Sports Fashion [JD.], SuperGroup [SGP], Genus [GNS], Jupiter Fund Management [JUP], and Dechra Pharmaceuticals [DPH]; while share that have been in the month are: Standard Chartered [STAN], BT Group [BT.A], Man Group [EMG], Rio Tinto [RIO], and William Hill [WMH].

Diary

In the diary this month are: the NYSE is closed on the 3rd (Labor Day), the FTSE quarterly index reviews will be announced on the 5th, and the US Nonfarm payroll report is on the 7th.


Article first appeared in Money Observer

Further articles on the market in September.

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Cumulative performance of FTSE 100 by day of the week

The following chart shows the cumulative performance of the FTSE 100 by day of the week for the period Jan-Aug 2018.

Cumulative performance of FTSE 100 by day of the week [Jan-Aug 2018]

From the beginning of the year the FTSE 100 Index has risen a cumulative 3.8% on Fridays, and fallen a cumulative 4.3% on Mondays.

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The Stock Market in August

The UK equity market has displayed a rather odd behavior in August since 2011: alternating mildly positive returns for the month in even years, with large negative returns in odd years. However, that pattern broke down last year, in 2017, when the market had a small positive return (0.7%) in an odd year.

Besides that odd pattern, as can be seen in the chart, apart from the anomalous years of 2008 and 2009, since 2000 even when the market does rise in August, the returns are small.

Monthly returns of FTSE All Share Index - August (1984-2017)

The average August

From 1970 the average return for August of the FTSE All-Share index has been 0.7%, with 63% of years seeing a positive return in the month. But since 2000 the performance has declined and the average return has fallen to zero. As a result, August now ranks ninth of all months of the year.

Sectors

The strongest sectors in August in the last ten years have been: Oil Equipment Services and Distribution, Gas, Water and Multiutilities, and Software and Computer Services. While the weakest sectors in the month have been: Fixed Line Telecommunications, Mining, and Oil & Gas Producers.

Companies

Over the last ten years the FTSE 350 stocks that have tended to perform well in August have been: Fisher (James) & Sons [FSJ], Petrofac [PFC], and Synthomer [SYNT]. Those first two stocks have seen positive returns in August in nine of the past ten years. By contrast, the FTSE 350 stocks that have tended to perform poorly in the month are: Standard Chartered [STAN], Rio Tinto [RIO], and Vedanta Resources [VED]. Rio Tinto has fallen in every August since 2007.

Diary

Significant dates this month are: the MPC interest rate announcement on the 2nd, US Nonfarm payroll report on the 3rd, the MSCI quarterly index review announcement on the 13th, and the LSE is closed on the 27th (Summer bank holiday).


Article first appeared in Money Observer

Further articles on the market in August.

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The Stock Market in July

Since 1970 the FTSE All-Share Index has seen an average return of 0.8% in July, with 54% of years seeing positive returns in this month. This makes July the fifth strongest month of the year for shares. As can be seen in the accompanying chart, in the last nine years the market has only fallen twice in July; so currently July is on a roll.

Monthly returns of FTSE All Share Index - July (1984-2017) 2

The average July

In an average July the start of the month tends to be strong ­ the first week of the month is among the top ten strongest weeks in the year. After that, the market has a tendency 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 (an average of 0.1 percentage points since 1986). 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 (the UK index has out-performed the US index by an average of 1.0 percentage points since 1984).

Sectors

Historically the sectors that have been strong in July are Banks, Real Estate Investment Trusts, and Software & Computer Services, while weak sectors have been Electricity, Industrial Transportation, and Health Care Equipment & Services.

Companies

On the shares front, companies that have seen strong share performance in July have been: Travis Perkins [TPK], Renishaw [RSW], Morgan Advanced Materials [MGAM], Bodycote [BOY], and Elementis [ELM]. The latter’s shares have only fallen once in July in the past ten years. Companies that have historically performed weakly in July are: TalkTalk Telecom Group [TALK], SSE [SSE], CRH [CRH], Redefine International [RDI], Babcock International Group [BAB]. Shares of SSE have fallen every year in July except one in the past ten years ­ the worst record of any FTSE 350 stock.

Diary

July is a busy month for companies announcing their interim results: 28 FTSE 100 companies will be doing so and 47 FTSE 250 companies.

On the economics front: there is the US Nonfarm payroll report on the 6th, and the two-day FOMC meeting starts on the 31st. The New York Stock Exchange will be closed on 4th July.


Article first appeared in Money Observer

Further articles on the market in July.

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The Stock Market in June

A quick glance at the accompanying chart shows that June is not usually a good month for equities. The chart shows the month returns for June of the FTSE All-Share Index from 1984; one can easily see the market falls more often than it rises in June. And when the market does decline, the falls can be quite large, whereas the positive returns are usually only modest.

Monthly returns of FTSE All Share Index - June (1984-2017)

In the 48 years since 1970 the market has seen positive returns in June 21 times, with an average month return of -1.0%. In recent years the record is even worse. In the 18 years since 2000 the market has seen positive returns in June just seven times (36%), with an average month return of -1.7%. Last year continued the trend, with a -2.8% fall in the market in June.

Not surprisingly June has the second worst record for equity returns of all month. And the May-June period has been the weakest two-month period in the year for the market.

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, although the market ends the month on a positive note – the last trading day is the second strongest in the year.

Companies

Over the last ten years FTSE 350 stocks that have tended to be strong in June are: BTG [BTG], RPC Group [RPC], Halma [HLMA], Telecom plus [TEP], and Ted Baker [TED]. While stocks that have a poor track record in the month are: Barclays [BARC], Thomas Cook Group [TCG], Grafton Group [GFTU], Travis Perkins [TPK], and Marston’s [MARS]. Just two stocks in the FTSE350 have fallen in every June for the past ten years: Barclays [BARC] and Bodycote [BOY]; over this period the average June return for Barclays shares has been -10.5%, the lowest average return for any FTSE350 stock..

Diary

Not much action on the results front this month, June is the quietest month for results from FTSE 100 companies – just two companies making announcements this month.

This is quite a busy month on the economics front: there is the US Nonfarm payroll report on the 1st, the FOMC interest rate announcement on the 13th, ECB Governing Council Meeting on the 14th, and the MPC interest rate announcement on the 21st. There’s Triple Witching on the 15th. And on the 15th the announcement will be made of any changes in the FTSE 100 and other FTSE indices.


Article first appeared in Money Observer

Further articles on the market in June.

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FTSE 100 and FTSE 250 Quarterly Review – June 2018

After market close on 30 May 2018 FTSE Russell confirmed the following changes to the FTSE 100 and FTSE 250 indices. The changes will be implemented at the close Friday, 15 June 2018 and take effect from the start of trading on Monday, 18 June 2018.

FTSE 100

Joining:

GVC Holding [GVC]
Ocado Group [OCDO]

Leaving:

G4S [GFS]
Mediclinic [MDC]

FTSE 250

Joining:

Mediclinic Intl [MDC]
G4S [GFS]
Integrafi n Hldgs [IHP]
Laird [LRD]
Energean Oil & Gas [ENOG]
Premier Oil [PMO]

Leaving

Ocado Group [OCDO]
GVC Holdings [GVC]
Pets At Home Group [PETS]
Marstons [MARS]
Woodford Patient Capital Trust [WPCT]
Purecircle [PURE]

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The Stock Market in May

It’s that time of the year again when stock market lore advises investors to get out of the market and, effectively, go on holiday for six months. And, indeed, Sell in May has been good advice over certain periods, for example since 1970 the average return in May for the FTSE All-Share Index has been -0.4% (making it one of only three months that has a negative return ­ the other two being June and September).

Monthly returns of FTSE All Share Index - May (1984-2017)

However, in recent years equities have performed somewhat better in May. Since 2000, the market has seen more Mays with positive month returns than negative and, as can be seen in the accompanying chart, in the last five years the market has been up every May (last year, in 2017, the FTSE All-Share Index had a not insignificant month return of 3.9%).

So, why does May have a bad reputation for shares, and why is the saying “sell in May” so popular?

One reason can be seen in the chart. Although the proportion of positive and negative month returns in May are roughly equal, it can be seen that the positive returns in May are relatively low, whereas when the market falls in May it can suffer quite a large sell-off. In May 2012 the FTSE All-Share Index fell 7.5%, which the largest fall in the index in any month in the last six years.

The average May

In an average May the market trades fairly flat for the first two weeks of the month, and then prices drift lower in the second half.

Stocks

At the stock level, in the last ten years the FTSE 350 shares with the best average performance in May have been: Aveva Group [AVV], 3i Group [III], Babcock International Group [BAB], Cranswick [CWK], and Severn Trent [SVT]. All these stocks have only seen a negative return in May in one year since 2007. While the FTSE 350 shares with the worst record in May have been Petra Diamonds [PDL], Ferrexpo [FXPO], Thomas Cook Group [TCG], Acacia Mining [ACA], and Carillion [CLLN],

Diary

Coming up in May we have the two-day FOMC meeting starting on the 1st, US Nonfarm payroll report on the 4th, May Day bank holiday on the 7th (LSE closed), MPC interest rate announcement on the 10th, Spring bank holiday on the 28th (LSE and NYSE closed), and the quarterly 30th.


Article first appeared in Money Observer

Further articles on the market in May.

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The Stock Market in April

Since 1970, the FTSE All-Share Index has fallen in April in only nine years. This is quite remarkable, and not surprisingly makes April the strongest month of the year for equities. The average return for the index in the month since 1970 is 2.6%, again this is the best performance of any month of the year by quite a margin. Although in recent years, the market’s performance in April has not been so stellar. Since 2000, the average return of the FTSE All-Share Index in April has been 1.8%, with positive month returns seen in 12 of the last 18 years. And it might be noted that the market actually fell in April of last year.

Monthly returns of FTSE All Share Index - April (1984-2017)

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 strong half of the year

Investors need to make the most of April. After this month the market enters a six-month period when equities have tended to tread water (the Sell in May effect).

Sectors

The FTSE 350 sectors that tend to be strong in April are: Industrial Engineering, General Retailers, and Oil & Gas Producers; while the weaker sectors are: Construction & Materials, Household Goods, and Media.

Stocks

At the stock level, the five FTSE 350 shares with the best April volatility-adjusted returns over the past ten years are: JD Sports Fashion [JD.], Ashmore Group [ASHM], Renishaw [RSW], UDG Healthcare [UDG], and Weir Group [WEIR]. Just two FTSE 350 stocks have seen their shares rise in every April since 2007: JD Sports Fashion and Temple Bar Investment Trust. The FTSE 350 stocks with the weakest record in April have been: Balfour Beatty [BBY], BAE Systems [BA.], RELX [REL], Booker Group [BOK], and Pearson [PSON]. Since 2007 the shares of Balfour Beatty and RELX have seen positive returns in April in only three years.

FTSE 100 v S&P 500

This is the strongest month for the FTSE 100 relative to the S&P 500 (in sterling terms), the former out-performs the latter by an average of 1.3 percentage points in April ­ the UK index has out-performed the US index (in sterling terms) in April in 14 of the past 16 years.

Easter holiday

It’s Easter on 1st April so the LSE will be closed on the 2nd (Easter Monday). A famous anomaly in stock markets is that prices tend to be strong on the day preceding and the day following a holiday. This effect is strongest in the year around the Easter holiday.


Article first appeared in Money Observer

Further articles on the market in April.

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UK sector indices 2018 1Q

The following chart plots the performance of UK FTSE 350 sector indices for the first quarter 2018.

UK sector indices - 2018 1Q returns

The data for the chart is given in the following table.

Sector TIDM Rtn(%)
Automobiles & Parts 42.2
Industrial Metals 13.2
Industrial Transportation 3.7
Chemicals 2.4
Health Care Equipment & Services 2.1
Aerospace & Defense 0.6
Food & Drug Retailers -0.4
General Industrials -0.5
Forestry & Paper -0.8
Pharmaceuticals & Biotechnology -1.4
Industrial Engineering -2.0
Nonlife Insurance -2.9
Electricity -3.3
Electronic & Electrical Equipment -3.4
Media -3.7
Real Estate Investment Trusts -4.5
Personal Goods -4.9
Life Insurance -4.9
Financial Services -4.9
Equity Investment Instruments -5.1
Real Estate Investment & Services -5.1
Construction & Materials -6.8
Travel & Leisure -7.3
Mining -7.8
Support Services -8.4
Gas, Water & Multiutilities -8.4
Banks -9.0
Oil & Gas Producers -9.1
Oil Equipment, Services & Distribution -9.9
General Retailers -10.2
Beverages -10.3
Household Goods & Home Construction -12.3
Fixed Line Telecommunications -16.0
Food Producers -17.1
Mobile Telecommunications -17.7
Tobacco -18.9
Software & Computer Services -31.1

 

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