Solar eclipse 2017

A solar eclipse occurs when the moon passes between the earth and the sun. A total eclipse occurs when the moon fully blocks the sun; these are quite rare as they only exist along a narrow path on the surface of the Earth. Other types of eclipses are annular and partial when only part of the sun is obscured.

Solar eclipse [2017] 03

On 21 August 2017 the US will experience a total eclipse. This is a big event as the last total eclipse observable in the continental US was in 1979 (when, in fact, the weather was not the best). And the last solar eclipse whose path of totality moved from coast to coast (as it will in 2017) was back in 1918. Of course, this being the United States, the Americans will no doubt play the whole thing down and it may pass many by without being noticed at all.

It can be a scary thing when the sun suddenly disappears in the middle of the day and in olden times people would become fearful at the time of eclipses. Various stories were told to explain the terrible event. Many of these myths involved the sun being eaten by a large animal, for example in Vietnam people believed that a giant frog was devouring the sun (has this actually ever been truly disproved?) Customs developed to chase away whatever was eating the sun by banging pots and pans ­ so far this has proved a remarkably successful strategy and has worked every time.

Scientists (slayers of myths, and general killjoys) claim that there is no evidence that solar eclipses affect human behaviour, health or the environment.

But is this true?

The above table lists all the total solar eclipses seen in the US since 1900, with in each case a sparkline showing the Dow Jones Industrial Average for the four days around the eclipse (the eclipse is on the 3rd day).

And the following two charts plot the returns of the Dow Jones Industrial Average on the days around the 15 total solar eclipses that have been visible from the United States since 1900. S(-1) is the day before the eclipse, S(0) the day of the eclipse, and S(+1) the day after. The following chart plots the average return for the three days…

Solar eclipse [2017] 01…and the chart below plots the proportion of days that had positive returns.

Solar eclipse [2017] 02

It can be observed in both the sparklines and the bar charts that on the day before the eclipse, and on the day itself, the market tends to be weak (investors fearful of the big frog). But on the day after the eclipse the market bounces back ­ the frog has gone and the sun is back.

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The Stock Market in August

Since 2011 the UK equity market has displayed a rather odd behavior in August: alternating mildly positive returns for the month in even years, with large negative returns in odd years. In the event that this pattern continues then we are due a large fall in the market this year in August. 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 (1984-2016)

The average August

From 1970 the average return for August of the FTSE All-Share index has been 0.7%, with 62% 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

Stocks

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 3rd, US Nonfarm payroll report on the 4th, the MSCI quarterly index review announcement on the 10th, and the LSE is closed on the 28th (Summer bank holiday). The result of the quarterly FTSE index review (including changes for the FTSE 100 and 250 indices) will be announced on the 31st.

Solar eclipse

And on the 21st the US will experience a total eclipse. This is a big event as the last total eclipse observable in the continental US was in 1979 (when, in fact, the weather was not the best). And the last solar eclipse whose path of totality moved from coast to coast (as it will in 2017) was back in 1918. And investors should be interested in this because? Well, spooky things happen around eclipses.

On average in the 15 total solar eclipses that have been visible from the United States since 1900, the Dow Jones Index tends to weak on the day before the eclipse, and on the day itself, but then prices bounce back on the day after.


Article first appeared in Money Observer

Further articles on the market in August.

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International markets 2017 1H

The following charts plot the performance of a selection of world markets in the first half 2017.

Domestic currency

International markets 2017 1H

GBP

The following chart plots the GBP-adjusted returns (i.e. these are the returns for a GB pound investor).

International markets (GBP) 2017 1H

USD

The following chart plots the USD-adjusted returns (i.e. these are returns for a US dollar investor).

International markets (USD) 2017 1H

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Currency rate changes 2017 1H

GBP

The following chart shows currency rate changes against GBP for the first half 2017. For example, GBP fell 2.9%% against the Euro.

Currency rate changes against GBP 2017 1H

USD

The following chart shows currency rate changes against USD for the first half 2017. For example, USD fell 7.9% against the Euro.

Currency rate changes against USD 2017 1H

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UK equity indices returns 2017 2Q & 1H

2017 2Q

The following chart plots the performance of UK equity indices in the second quarter 2017.

UK equity index returns 2017 2Q

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

Index TIDM Rtn(%)
FTSE AIM 100 6.3
FTSE AIM All-Share 3.9
FTSE Fledgling 3.7
FTSE SmallCap 2.8
FTSE 250 1.9
FTSE TechMARK All Share 1.6
FTSE TechMARK Focus Index 1.5
FTSE All-Share – Total Return 1.4
FTSE 100 Index – Total Return 1.0
FTSE4Good UK 0.5
FTSE4Good UK 50 0.3
FTSE All-Share 0.3
FTSE 350 0.2
FTSE 100 -0.1
FTSE UK Dividend Plus -1.4

2017 1H

The following chart plots the performance of UK equity indices in the first half 2017.

UK equity index returns 2017 1H

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

Index Rtn(%)
FTSE AIM 100 19.01
FTSE AIM All-Share 14.4
FTSE Fledgling 12.26
FTSE SmallCap 8.59
FTSE 250 6.99
FTSE All-Share – Total Return 5.5
FTSE 100 Index – Total Return 4.69
FTSE TechMARK All Share 3.99
FTSE TechMARK Focus Index 3.72
FTSE All-Share 3.33
FTSE 350 3.14
FTSE4Good UK 2.65
FTSE 100 2.38
FTSE4Good UK 50 2.12
FTSE UK Dividend Plus 1.87
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UK sector indices 2017 2Q & 1H

2017 2Q

The following chart plots the performance of UK FTSE 350 sector indices for the second quarter 2017.

UK sector index returns 2017 2Q

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

Sector TIDM Rtn(%)
Health Care Equipment & Services 11.0
Nonlife Insurance 7.3
Software & Computer Services 6.6
Aerospace & Defense 6.3
Financial Services 6.3
Travel & Leisure 5.4
Food Producers 5.2
Electronic & Electrical Equipment 4.8
Industrial Metals 4.6
Household Goods & Home Construction 4.6
Forestry & Paper 4.5
Real Estate Investment & Services 4.4
General Industrials 4.2
Personal Goods 3.9
Mobile Telecommunications 3.7
Banks 3.7
Life Insurance 3.4
Equity Investment Instruments 3.4
Support Services 2.8
Industrial Transportation 1.1
Real Estate Investment Trusts 0.7
Chemicals 0.5
Beverages 0.2
Industrial Engineering -0.2
Pharmaceuticals & Biotechnology -1.4
Electricity -1.4
Construction & Materials -2.0
Media -2.0
General Retailers -3.6
Tobacco -3.9
Oil & Gas Producers -4.1
Food & Drug Retailers -4.7
Mining -5.7
Fixed Line Telecommunications -7.2
Gas, Water & Multiutilities -7.4
Automobiles & Parts -10.3
Oil Equipment, Services & Distribution -25.3

2017 1H

The following chart plots the performance of UK FTSE 350 sector indices for the first half 2017.

UK sector index returns 2017 1H

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

Sector Rtn(%)
Personal Goods 22.5
Forestry & Paper 20.9
Electronic & Electrical Equipment 17.9
Household Goods & Home Construction 15.1
Aerospace & Defense 13.4
Health Care Equipment & Services 12.3
Financial Services 12.2
Nonlife Insurance 11.0
General Industrials 10.2
Real Estate Investment & Services 10.0
Travel & Leisure 9.8
Industrial Metals 9.7
Support Services 9.3
Beverages 9.2
Tobacco 8.7
Industrial Engineering 8.7
Equity Investment Instruments 8.6
Mobile Telecommunications 8.6
Software & Computer Services 7.8
Life Insurance 6.3
Banks 5.9
Pharmaceuticals & Biotechnology 4.6
Chemicals 4.5
Food Producers 3.9
Industrial Transportation 1.1
Real Estate Investment Trusts 0.9
Mining -0.9
Construction & Materials -1.5
Automobiles & Parts -1.7
Media -2.1
Gas, Water & Multiutilities -3.6
General Retailers -6.4
Electricity -7.1
Food & Drug Retailers -7.7
Oil & Gas Producers -11.9
Fixed Line Telecommunications -18.6
Oil Equipment, Services & Distribution -26.6

 

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The Stock Market in July

After traditional weakness in June, share prices often bounce back in July – making this month a short period of strength in an otherwise weak 6-month period (May to October).

Since 1970 the FTSE All-Share Index has seen an average return of 0.8% in July, with 53% 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 recent years the market has been stronger than its longer-term performance. In the last eight years the market has only seen falls in July twice, and the average return in July has been 3.3%. So currently July is on a roll.

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

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.

Large caps v mid-caps

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 0.2 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 Chemicals, Personal Goods and Real Estate Investment Trusts while weak sectors have been Gas, Water & Multiutilities, Support Services and Beverages.

Shares

On the shares front, companies that have seen strong share performance in July have been: Elementis [ELM], Croda International [CRDA], and Barclays [BARC] – all three shares have seen positive returns in July in nine of the past ten years. Companies that have historically performed weakly in July are: Halma [HLMA], Babcock International [BAB], and Redefine International [RDI].

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 7th, and the two-day FOMC meeting starts on the 25th. 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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UK equities in days around parliamentary elections

The following chart plots the number of times the FTSE All-Share Index has had positive returns in the 7 days around UK parliamentary elections since 1970.

For example, in the 12 elections there have been since 1970 the Index has risen 7 times on the third day, E(-3), before election day E(0).

UK equity performance in days around elections - positive returns

The following chart is similar to the above but plots the average day returns for the Index on each of the 7 days around elections.

For example, in the 12 elections since 1970 the Index has had an average return of 0.1% on the day before, E(-1), the election.

UK equity performance in the days around elections (average returns)

Interestingly, the market  has tended to see positive returns in the days immediately around elections, with the strongest day being election day itself with an average return of 0.6% (perhaps a .relief rally marking the end of the tedious election campaigns?)

The day following elections has a negative average return of  0.04% (as investors realise the ramifications of the election result?)


Further articles on the market and elections.

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The Stock Market in June

June is not usually a good month for investors. The accompanying 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 (1984-2016)

Putting some numbers to this, in the 47 years since 1970 the market has seen positive returns in June 21 times (45%), with an average month return of -1.0%. In recent years the record is even worse. In the 17 years since 2000 the market has seen positive returns in June just 7 times (41%), with an average month return of -1.6%. Last year saw an unusually positive return in June when the market rose 2.5% (over the turbulent time of the EU referendum).

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.

Sectors

It’s not all gloom in June however, three sectors have gone against the trend and seen consistent strength in the month: Beverages, Oil & Gas Producers and Pharmaceuticals & Biotechnology.

Stocks

FTSE 350 stocks that have also tended to be strong in June are: RPC Group [RPC], NCC Group [NCC], and BTG [BTG]. While stocks that have a track record in the month are Barclays [BARC] and Travis Perkins [TPK]. Barclays has a quite shocking record of performance in June – the worst of any FTSE 350 stock. In the last four years in June Barclays shares have fallen -13%, -14%, -4%, and -24% respectively. In the ten years since 2007 the average return of Barclays shares in June has been -11.1%.

Company results

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.

Diary

This is quite a busy month on the economics front: there is the US Nonfarm payroll report on the 2nd, ECB Governing Council Meeting on the 8th, FOMC interest rate announcement on the 14th, the MPC interest rate announcement on the 15th, and Triple Witching on the 16th.


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 2017

After market close on 31 May 2017 FTSE Russell confirmed the following changes to the FTSE 100 and FTSE 250 indices. The changes will be implemented at the close Friday, 16 June 2017 and take effect from the start of trading on Monday, 19 June 2017.

FTSE 100

Joining: G4S [GFS], Segro [SGRO]

Leaving: Hikma Pharmaceuticals [HIK], Intu Properties [INTU]

FTSE 250

Joining: Coats Group [COA], FDM Group Holdings [FDM]. Melrose Industries [MRO], Pershing Square Holdings[PSH], Sirius Minerals [SXX], TBC Bank Group [TBCG]

Leaving: Allied Minds [ALM], AO World [AO.], BH Macro (GBP) [BHMG], Debenhams [DEB], Keller [KLR], SVG Capital [SVI]

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