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

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The Stock Market in July

The old stock market adage, “Sell in May and go away” continues, “don’t come back till St Leger’s Day”. However, analysis of the historic data shows that the worst returns over this period occur in May and June. After June, returns up to St Leger’s (in September) tend to be quite flat.

In fact, after traditional weakness in June, prices quite often bounce back in July – making this month a small island of strength in an otherwise weak 6-month period. Since 1970 the FTSE All-Share Index has seen an average return of 0.8% in July, with 52% of years seeing positive returns in this month. This makes July the fourth strongest month of the year for shares.

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

As can be seen on the accompanying chart, in recent years shares have been particularly strong in this month. In the past 7 years the market’s returns in July have been over 6% in three years. Currently, July is on quite a run!

The average July

On average 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 propensity to drift lower for a couple of weeks until finishing strongly in the final week of the month.

FTSE 100 v FTSE 250

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 0.3 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 (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.

Diary

July is a busy month for companies announcing their interim results: 23 FTSE 100 companies will be doing so, and 44 FTSE 250 companies.

On the economics front: there is the US Nonfarm payroll report on the 1st, the MPC interest rate announcement on the 14th, and the two-day FOMC meeting starts on the 26th. The New York Stock Exchange will be closed on 3rd July. And on the outside chance that England don’t win Euro 2016, fans can instead celebrate the 50th anniversary of winning the World Cup on 30th July.


Article first appeared in Money Observer

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Strong/weak sectors in July

Strong sectors

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

Sector TIDM
Chemicals
Personal Goods
Real Estate Investment Trusts
Technology Hardware & Equipment

Weak sectors

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

Sector TIDM
Beverages
Gas, Water & Multiutilities
Industrial Transportation
Support Services

 

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The Stock Market in July

Share prices in July have historically started to recover some of their bounce after the weak months of May and June. On average the stock market increases 1.0% in July, with a probability of a positive return in the month of 57%. This makes July the fifth strongest month of the year for shares. In recent years the market has been unusually strong: as can be seen from the accompanying chart the market has risen over 6% in the month three times in the past six years.

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

The average July

The start of the month tends to be strong: the first trading day (FTD) is one of the strongest FTDs for any month in the year, and the first week of the month is among the top ten strongest weeks in the year. After that, the market has a propensity 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. 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.

Sectors

Although this may not be the most exciting month for the overall market, there can be a fair degree of divergence of performance at the sector level. 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

At the stock level, the five strongest FTSE 350 companies in July have recently been Elementis, Brown Group, Greene King, Shire, and Land Securities Group; all five shares have risen in July in nine of the past ten years. Two weak July stocks are IP Group and SSE.

July is a busy month for companies announcing their interim results: 23 FTSE 100 companies will be doing so, and 44 FTSE 250 companies.

Diary

On the economics front: there is the US Nonfarm payroll report on the 2nd, the MPC interest rate announcement on the 9th, the, and the two-day FOMC meeting starts on the 28th. And the New York Stock Exchange will be closed on 3rd July.


Article first appeared in Money Observer

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Shares that like/dislike July

Shares that like July

The following table lists the five FTSE 350 shares that have the best returns in July over the last ten years. For example, Elementis has an average return of 7.6% for the month of July. All stocks have risen in July for at least nine of the past ten years.

Company TIDM Avg(%)
Elementis 7.6
Brown (N) Group 6.9
Greene King 6.8
Shire 6.0
Land Securities Group 5.1

 Shares that dislike July

The following table lists the two FTSE 350 shares that have the worst returns in July over the last ten years. For example, IP Group has an average return of -4.1% for the month of July. Both stocks have fallen in at least seven of the past ten years in July.

Company TIDM Avg(%)
IP Group -4.1
SSE -2.0

An equally-weighted portfolio of the above strong July stocks would have out-performed every year an equally-weighted portfolio of the above weak July stocks by an average of 9.3 percentage points in July for the past ten years.

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Average market behaviour in July (2015)

The following chart plots the average performance of the FTSE 100 Index during July since 1984.

Average month chart - July (2015)

As can be seen, historically the market tends to rise for the first week, is flat for the following two weeks, falls in the fourth week, but then ends strongly in the final few days.

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Last trading day of July

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

Since 1984 the index average return on the July LTD has been 0.16%, which makes it the fifth strongest month LTD of the year. The probability of a increase on the July LTD is 47%

The following chart shows the FTSE 100 Index returns for every July LTD since 1984.
Last trading day of July (1984-2013) [2014]

 

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Strong/weak sectors in July

Strong sectors

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

Sector TIDM
Chemicals
Personal Goods
Real Estate Investment Trusts
Technology Hardware & Equipment

Weak sectors

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

Sector TIDM
Beverages
Gas, Water & Multiutilities
Industrial Transportation
Support Services

See also

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The Stock Market in July

After the weakest two-month period of the year, things improve for investors in this month. July ranks 5th of all months for performance: on average the market increases 0.8% in July, with a probability of a positive return of 55%. Although, in recent years, the market has been unusually strong: as can be seen from the accompanying chart, the market has risen over 6% three times in the past five years.

Monthly returns of FTSE All Share Index - July (1982-2013)The start of the month tends to be strong: the first trading day (FTD) is one of the strongest FTDs for any month in the year, and the first week of the month is among the top ten strongest weeks in the year. After that, the market has a propensity to drift lower for a couple of weeks until finishing strongly in the final week of the month.

Sectors

The sectors which tend to be strong in July are Chemicals, Personal Goods and Technology Hardware & Equipment; while the weak sectors are: Beverages, Gas, Water & Multiutilities and Support Services.

Shares

At the stock level, the five strongest FTSE 350 companies in July have recently been Greene King, Pace, Brown (N) Group, Wetherspoon (J D) and Dairy Crest Group; Greene King is the only FTSE 350 company whose shares have risen every July in the past ten years. Two weak July stocks are Petra Diamonds and Man Group.

July has been the most active month for flotations; over 50 of the companies in the FTSE 350 Index have had their IPOs in this month. For example, the 18th July will see the 20th anniversary of the listing of 3i Group.

It’s also a busy month for companies announcing their interim results: 23 FTSE 100 companies will be doing so, and 44 FTSE 250 companies.

Diary

On the economics front: there is the MPC interest rate announcement on the 10th, the US Nonfarm payroll report on the 11th, and the two-day FOMC meeting starts on the 29th.

The New York Stock Exchange will be closed for Independence Day on the 4th July.

And the significance of that for UK investors is what?

I’m glad you asked. A recent academic paper presents research that shows that when the US markets are on holiday but European markets are open, the latter markets enjoy abnormally high and positive returns. There are six such holidays in the year.

And, finally, to the question: do winners of the FIFA World Cup see a fillip in their national stock market? Short answer: no.


Article first appeared in Money Observer

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First trading day of July

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

Since 1984, the FTSE 100 Index has an average return of 0.48% on the July FTD (16 times the average daily return on all days), which makes it the third strongest FTD of the year. Although, as can be seen in the chart, the market has suffered two large falls in the past five years on this day.

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

First trading day of July (1984-2013) [2014]

 

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