Shares that like/dislike December (2014)

Shares that like December

The following table lists the five FTSE 350 shares that have the best returns in December over the last ten years. For example, G4S has an average return of 6.3% for the month of December. All stocks, except Ashtead, have risen in every December for the past ten years.

Company TIDM Avg(%)
G4S 6.3
Balfour Beatty 6.1
William Hill 5.0
Witan Investment Trust 4.8
Ashtead Group 13.4

Shares that dislike December

The following table lists the two FTSE 350 shares that have the worst returns in December over the last ten years. For example, Rank Group has an average return of -4.2% for the month of December. Both stocks have fallen in seven of the past ten years in December.

Company TIDM Avg(%)
Randgold Resources Ltd -1.8
Rank Group (The) -4.2

An equally-weighted portfolio of the above strong December stocks would have out-performed every year, except 2008, an equally-weighted portfolio of the above weak December stocks by an average of 10.1 percentage points in December for the past ten years.

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Average market behaviour in January

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

Average month chart - Jan (2014)As can be seen, historically the market starts strong the first few days but then sells off for two weeks, until rebounding strongly in the final week of the month.

December 2013

The following chart shows the average performance of the market in December (1984-2013) and overlays the actual performance in December 2013.

Average month chart - Dec overlay Dec 2013 (2013)In December 2013 the market was weaker than usual in the first couple of weeks, but the market then followed the historical trend when the Santa rally kicked in around the 10th trading day of the month.

 

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Last trading day of December

Tomorrow will be the last trading day (LTD) of December.

As explained in the 2014 edition of the Almanac the LTDs of months used to be stronger than average, but in recent years they have been weak. This is quite different from the first trading days of months which strongly out-perform the average for all days, and where the effect has strengthened in recent years.

Since 1984 the market has on average risen 0.04% on the LTD of December, with positive returns in 48% of all years, which makes the December LTD the fourth weakest month LTD in the year. Since year 2000 the market has risen on this day in only 5 years.

The following chart shows the FTSE 100 Index returns for every December LTD since 1984.

FTSE 100 Last Trading Day  for December (1984-2012) [2013]

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Market returns around Christmas and New Year

This analysis looks at the historic behaviour of the FTSE 100 Index since 1984 on the days around Christmas and New Year. The days studied were:

  • Days 1-3: the three trading days leading up to Christmas.
  • Days 4-6: the three trading days between Christmas and New Year.
  • Days 7-9: the first three trading days of the new year.

The following chart shows the average returns for these nine days around Christmas and New Year.

Average day returns around Christmas (2013) And the following chart shows the proportion of positive returns on the nine days.

Positive day returns around Christmas (2013)

Analysis

  1. The average daily change of the FTSE100 index from 1984 for all days is 0.03%; it can be seen that all nine days around Christmas and New Year have higher average returns than the average for all days.
  2. The strongest days are historically the two days leading up to Christmas and the two immediately following it.
  3. Generally, the market strength increase to the fourth day (the trading day immediately after Christmas) – this is the strongest day of the whole period, when the markets increases 81% of years since 1984 with an average rise of 0.34%. Although it should be noted that the standard deviation is the highest on this day, meaning that the volatility of returns is greatest (the index actually fell 3% on this day in 1987 and 2002).
  4. The weakest day in the period is the final trading day of the year – this is perhaps not surprising with traders closing positions for the year end.
  5. The new year generally starts strongly, but not as strong as those days of the week before.
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Average market behaviour in December

The following chart plots the average performance of the FTSE 100 Index during December since 1984 (more info on this type of chart).Average month chart - Dec (2013)

As can be seen, historically the market has traded fairly flat for the first two weeks of December and then risen very strongly in the second half of the month.

November 2013

The following chart shows the average performance of the market in November (1984-2012) and overlays the actual performance in November 2013.

Average month chart - Nov plus Nov 2013 (2013)

 

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Strong/weak sectors in December

Strong sectors

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

Sector TIDM
Construction & Materials
Life Insurance
Support Services
Travel & Leisure

Weak sectors

The following table lists the sectors that have been weak in December.

Sector TIDM
Banks
General Retailers
Pharmaceuticals & Biotechnology

 

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First trading day of December

As explained in the 2014 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 fallen on average 0.01% on the December FTD – it is the only month of the year with a negative average return on the FTD.

Since 2000, the performance has been a little stronger on the December FTD, but it is still one of the weakest month FTDs in the year.

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

FTSE 100 First Trading Day for December (1984-2012)

 

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Shares that like/dislike December

Shares that like December

The following table lists the five FTSE 350 shares that have the best returns in December over the last ten years. For example, William Hill has an average return of 5.5% for the month of December. Each stock has risen in every December in the past ten years.

Company TIDM Avg(%)
William Hill 5.5
Balfour Beatty 5.4
JPMorgan Emerging Markets Inv Trust 5.2
Witan Investment Trust 4.8
Alliance Trust 3.8

Shares that dislike December

The following table lists the three FTSE 350 shares that have the worst returns in December over the last ten years. For example, Centamin has an average return of -3.7% for the month of December. All three stocks have fallen in seven of the past ten years in December.

Company TIDM Avg(%)
Centamin -3.7
Rank Group (The) -3.7
Amlin -1.5

An equally-weighted portfolio of the above strong December stocks would have out-performed every year an equally-weighted portfolio of the above weak December stocks by an average of 7.9 percentage points in December for the past ten years.

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These stocks still don’t like December

A previous post noted that seven stocks had fallen in at least eight of the past ten Decembers (up to 2011). The following chart shows the peformance of these stocks for December 2012.

Thorntons bucked the trend by rising strongly in December (the stock had been strong most of the year). But an equally-weighted portfolio of the seven December-phobic stocks would still have under-performed the FTSE All Share by 15 percentage points.

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