The Stock Market in August

August used to be a good month for the stock market, but this has changed in recent years. Indeed, as can be seen in the accompanying chart, the market has fallen by over 6% in this month in two of the last five years. As it’s a month for holidays, trading volumes tend to be low for stocks which in some years can lead to some increased volatility.

Monthly returns of FTSE All Share Index - August (1984-2015)

The average August

Historically in a typical August the market tends to drift lower for the first couple of weeks and then increase for the final two weeks of the month. The final trading day of the month has historically been strong.

Sectors

The sectors which tend to be strong in August are Food & Drug Retailers, Gas, Water & Multiutilities, Health Care Equipment & Services and Household Goods; while the only predominantly weak sector is Chemicals.

Historically this has been a weak month for GBP against the USD, and also for silver.

August is the busiest month for FTSE 100 and FTSE 250 interim results announcements: 40 FTSE 100 companies and 87 FTSE 250 companies announce their interims this month.

Diary

Significant dates this month are: the MPC interest rate announcement on the 4th, US Nonfarm payroll report on the 5th, the MSCI quarterly index review announcement on the 11th, and the LSE is closed on the 31st (Summer bank Holiday).

FTSE indices quarterly review

The result of the quarterly FTSE index reviews (including changes for the FTSE 100 and 250 indices) will be announced on the 31st (this announcement of the 3rd quarterly review always used to be made in September, but since the timing was changed recently this can sometimes now take place in August,­ as is the case this year.

Olympics

The major known global event this August will be the Olympic Games. The Olympics generally have little impact on shares worldwide, but where some influence can be seen is in the shares of the host country ­ this year being Brazil. Analysis of stock markets in the year of the games shows that equities in host country markets appear to be weak in the months leading up to the games, perhaps when the media runs stories of cost overruns and missed timetables (interestingly, this has not been the case in Brazil so far this). And then there appears to be a relief rally afterwards.


Article first appeared in Money Observer

Further articles on the market in August.

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The Stock Market in August

Five years ago August was ranked the 5th strongest month in the year, but it has now slipped to 8th position. The average return in the month is 0.5%, while the probability of a positive return in August is 57%. As can be seen in the accompanying chart, there have been some nasty surprises in August – notably with large falls of over 7% in 1998 and 2011. Last year the market rose 1.5% in August.

Monthly returns of FTSE All Share Index - August (1984-2014)

Generally the volatility of stock returns for August is around the median for all months – certainly significantly below the high-volatility months of January, September and October.

The average August

In an average month for August the market tends to drift lower for the first couple of weeks and then increase for the final two weeks of the month. The final trading day of the month has historically been strong.

Internationally, August is not a good month for equities; August has the second lowest average monthly returns for 70 world equity markets. In domestic currency terms, August is the strongest month of the year for the FTSE 100 relative to the S&P 500, but after factoring in (the historically weak) GBPUSD rate much of that out-performance disappears.

Sectors

The sectors which tend to be strong in August are Food & Drug Retailers, Gas, Water & Multiutilities, Health Care Equipment & Services and Household Goods; while the only predominantly weak sector is Chemicals.

Shares

At the stock level, the five strongest FTSE 350 companies in August have recently been Fisher (James) & Sons [FSJ], Melrose Industries [MRO], Tullett Prebon [TLPR], Keller Group [KLR], and Bunzl [BNZL]. Fisher (James) is the only FTSE 350 company whose shares have risen every August in the past ten years; the other four shares have all risen in nine of the past ten years in August. Three weak August stocks are Xaar [XAR], Rio Tinto [RIO], and Standard Chartered [STAN], all of which have fallen in August in nine of the past ten years.

Diary

August is the busiest month for FTSE 100 and FTSE 250 interim results announcements: 40 FTSE 100 companies and 87 FTSE 250 companies announce their interims this months. So, not a good month for analysts to take a holiday.

Significant dates this month are: the MPC interest rate announcement on the 6th, US Nonfarm payroll report on the 7th, the MSCI quarterly index review announcement on the 13th, and the LSE is closed on the 31st (Summer bank Holiday).


Article first appeared in Money Observer

Further articles on the market in August.

 

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The Stock Market in August

Not surprisingly perhaps, during the low-volume summer doldrums, the performance of shares in August is very similar to that in July. The average return for the stock market in the month is 0.8%, which makes August the fifth strongest month in the year; although since 2000 the average return has fallen to 0.3%. The probability of a positive return in August is 61%. It should be noted that there have been some nasty surprises in August, with large falls of over 7% in 1998 and 2011. But generally the volatility of stock returns for August is around the median for all months – certainly significantly below the high-volatility months of January, September and October.

Monthly returns of FTSE All Share Index - August (1982-2013)In an average month for August the market tends to drift lower for the first couple of weeks and then increase for the final two weeks of the month. The final trading day of the month has historically been strong.

FTSE 100 v S&P 500

An interesting characteristic of August is that it is the strongest month for the FTSE 100 Index relative to the S&P500 Index – the former has out-performed the latter by an average of 0.7 percentage points this month. In the 29 years since the start of the FTSE 100 Index, it has out-performed the US index in August in 18 years.

Sectors

The sectors which tend to be strong in August are Food & Drug Retailers, Gas, Water & Multiutilities, Health Care Equipment & Services and Household Goods; while the only predominantly weak sector is Chemicals.

Shares

At the stock level, the five strongest FTSE 350 companies in August have recently been Fisher (James) & Sons [FSJ], Keller Group [KLR], Bunzl [BNZL], Centrica [CNA] and Tesco [TSCO]. Fisher (James) is the only FTSE 350 company whose shares have risen every August in the past ten years; the other four shares have all risen in nine of the past ten years in August. Three weak August stocks are Pennon Group [PNN], Rio Tinto [RIO] and Investec [INVP].

Diary

August is the busiest month for FTSE 100 and FTSE 250 interim results announcements: 40 FTSE 100 companies and 87 FTSE 250 companies announce their interims this months. So, not a good month for analysts to take a holiday.

Significant dates this month are: the US Nonfarm payroll report on the 1st, MPC interest rate announcement on the 7th, the MSCI quarterly index review announcement on the 13th


Article first appeared in Money Observer

Further articles on August.

 

 

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First trading day of August

Tomorrow will be the first trading day (FTD) of August.

Since 1984, the FTSE 100 Index has an average return of 0.06% on the August FTD, which makes it the ninth strongest FTD of the year.

The following chart shows the returns for every August FTD since 1984.
First trading day of August (1984-2013) [2014]

 

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Strong/weak sectors in August

Strong sectors

The table below lists the sectors that have historically out-performed the market in August.

Sector TIDM
Food & Drug Retailers
Gas, Water & Multiutilities
Health Care Equipment & Services
Household Goods
Software & Computer Services

 Weak sectors

The table below lists the sectors that have historically under-performed the market in August.

Sector TIDM
Chemicals

See also

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Average market behaviour in September

The following chart plots the average performance of the FTSE 100 Index during September since 1984 (more info on this type of chart).

Average month chart of September for FTSE 100 Index

As can be seen, historically the market has declined steadily throughout September, somewhat leveling out in the final week.


 August 2013

The average chart for August was posted a month ago here. The following reproduces that chart and overlays the actual FTSE 100 for August 2013.

 

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Average market behaviour in August

The following chart plots the average performance of the FTSE 100 Index during August since 1984 (more info on this type of chart).

Average behaviour of the FTSE 100 Index in August

As can be seen, on average the market tends to trade flat for the first couple of weeks and then to rise gently in the second half of the month.


July 2013

The average chart for June was posted a month ago here. The following reproduces that chart and overlays the actual FTSE 100 for July 2013.

 

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Strong/weak sectors in August

The following table lists the sectors that have historically been strong in August.

Sector TIDM
Food & Drug Retailers
Gas, Water & Multiutilities
Health Care Equipment & Services
Household Goods
Software & Computer Services

And the following table lists the sectors that have been weak in August.

Sector TIDM
Chemicals

 

 

 

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The Stock Market in August

After the weak 3-month (May-July) run for the stock market, shares tend to be stronger in August. Since 1970 the FTSE All Share Index has risen by an average of 0.9% in August, with 63% of all years seeing positive returns in this month. Since 2000, performance has been weaker (inline with the general market), but returns in August have still been positive.

The accompanying chart plots the percentage performance of the FTSE All Share Index for each August since 1982. For example, last year in 2012 the market rose 1.5% in August. As can be seen, returns in August are more often positive than negative, although when the market does fall in this month it can suffer quite a large fall.

In an average month for August the market tends to trade flat for the first couple of weeks and then gently increase for the final two weeks of the month. The final trading day of the month has historically been strong – the third strongest final trading day of all months in the year.

UK vs US

An interesting characteristic of August is that it is the strongest month for the FTSE 100 Index relative the S&P500 Index – UK shares like August (or US shares don’t like the month)! In the 29 years since the inception of the FTSE 100 Index, it has out-performed the US index in 18 years.

Sectors and stocks

In the last twenty years the sectors that have been strong in August have been: Food & Drug Retailers, Household Goods, and Health Care Equipment & Services. While on the other side, the only sector that has been consistently weak this month has been Chemicals.

For stocks, the following companies have performed well in August over the last ten years: Fisher (James) & Sons, Keller Group, and Bunzl (these shares have risen in at least nine of the last ten years in August (Fisher is the only FTSE 350 stock whose shares have risen every August since 2003). The shares that don’t seem to like August are: Investec, Rio Tinto and Pennon Group (these shares have fallen in August in eight of the past ten years).

Diary

Dates to watch out for this month are: 8 August when the MPC interest rate announcement will be made, 14 August when the results of the MSCI index review are announced (and which can move the prices of stocks affected). And if you get up early to trade the market on 26 August, go back to bed – it’s the Summer bank holiday and the London Stock Exchange is closed!

Article first appeared in Money Observer.

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First trading day of August

Tomorrow, Thursday, will be the first trading day (FTD) of August.

As explained in the 2013 edition of the Almanac, the market has a tendency to be strong on the FTD of a month. And this effect has been even more pronounced in recent years.

Since 1984, the FTSE 100 Index has risen on average 0.03% on the August FTD – ranking it 7th of all the monthly FTDs. The index has had a positive return on this day in 62% of years since 1984.

The following chart shows the returns for every August FTD since 1984.

First trading day of the FTSE 100 Index in August

 

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