The Stock Market in November

Since 1990 the FTSE All-Share Index has seen an average return of 0.7% in the month of November; with positive returns in 15 of the last 27 years. This ranks November in the middle of the 12 months for equity performance. However, in recent years the market has been noticeably weak in November ­in the last 11 years the Index has only seen positive returns in the month in three years.

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

Sell in May…

The significant feature of November is that it marks the start of the strong six-month period of the year (November to April ­ an aspect of the Sell in May effect). In other words, investors should be increasing exposure to the market this month (if they haven’t already done so in October).

Sectors

In the last ten years the FTSE 350 sectors that have performed strongly in November have been: Beverages, Electronic & Electrical Equipment, Fixed Line Telecommunications, Food Producers, Life Insurance, and  Travel & Leisure. While the weak sectors have been: Aerospace & Defense, Banks, Oil & Gas Producers, and Real Estate Investment Trusts.

FOMC announcements

Since 1981 the US Federal Open Market Committee (FOMC) has had eight scheduled meetings per year, the timing of which is quite irregular. Each meeting is two days long, with a policy statement released at the end of the second day (1 November this month). Many academic papers have studied the effect of these FOMC announcements on financial markets. One such paper found large average excess returns on U.S. equities in the 24-hour period immediately before the announcements (an effect the paper called the “Pre-FOMC Announcement Drift”). According to this paper, “about 80% of annual realized excess stock returns since 1994 are accounted for by the pre-FOMC announcement drift”.

A quite amazing finding!

It might be added that a similar effect can be seen for the UK equity market as well. The average daily return for the UK market in the 24 hours before the FOMC statement is 0.33%, over ten times greater than the average daily return on all other days.

Diary

Besides the FOMC statement other dates to watch for this month are: 2 Nov – MPC interest rate announcement at 12 noon, 3 Nov – US Nonfarm payroll report, and 23 Nov – Thanksgiving Day (US), NYSE closed.


Article first appeared in Money Observer

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The Stock Market in November

November tends to be one of the quieter month for shares. After the sometimes dramatic moves in September and October, and before the traditional end-of-year rally in December, investors seem to take a pause in November. The month currently has the lowest volatility of monthly returns of any month in the year. Of course, this year may be different with the US presidential elections this month.

As can be seen in the accompanying chart, the market used to be strong in November for many years prior to 2005, but since then the market has been more likely to fall than rise in the month and has seen an average month return of -0.6%.

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

An average November

As can be seen in the following chart, on average the market tends to rise the first four days of the month, this could be influenced by investors buying into the market anticipating the strong six-month period of the year November to April (the Sell in May effect). After that the market then gives up those gains over the following few days, rises again, falls back, until finally increasing quite strongly over the final seven trading days of the month.

FTSE 100 average month chart for November [1984-2015]

Shares

In the last ten years the FTSE 350 shares that have performed best in November have been Babcock International Group [BAB], Compass Group [CPG], CRH [CRH], BT Group [BT.A], and Greene King [GNK]; Babcock, Compass and CRH have only had negative returns in November in one year since 2006. An equally-weighted portfolio of these five shares would have out-performed the FTSE 350 index by an average of 5.2 percentage points each year since 2006. While the FTSE 350 shares with the worst November performance over the last ten years have been Vedanta Resources [VED], Royal Bank of Scotland Group (The) [RBS], Tullett Prebon [TLPR], Ashmore Group [ASHM], and Standard Chartered [STAN].

Elsewhere, November has been a strong month for gold and weak for oil and GBPUSD.

Diary

This is a busy month for interim results: 64 companies from the FTSE 350 make their announcements this month.

Dates to watch for this month are: 1 Nov – two-day FOMC meeting starts, 3 Nov – MPC interest rate announcement at 12 noon, 4 Nov – US Nonfarm payroll report, 8 Nov – US Presidential Election, 24 Nov – Thanksgiving Day (US), NYSE closed, and 30 Nov – FTSE 100 quarterly review.

The big event this month will obviously be the US presidential election on 8 November. Analysis of the impact of these presidential elections on the UK market since 1972 shows that on average UK shares tends to trade stronger as the election day approaches, and then tails off in the few days following the election. The strongest day of the period has been the election day itself.

Further articles on the US presidential elections.


Article first appeared in Money Observer

Further articles on the market in November.

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Shares that like November

Shares that have been strong November

The following table lists the five FTSE 350 shares that have the best returns in November over the last ten years. For example, Babcock has an average return of 4.6% for the month of November. Each stock has risen in at least eight of the past ten years in November.

Company TIDM Avg(%)
Babcock International Group 4.6
Compass Group 4.5
CRH 4.3
BT Group 5.3
Greene King 4.8

A portfolio of these four stocks would have out-performed the FTSE 350 Index in November in nine of the last ten years with an average out-performance of 5.2 percentage points each November.

Shares that have been weak November

The following table lists the five FTSE 350 shares that have the worst returns in November over the last ten years. For example, Vedanta Reseources has an average return of -10.5% for the month of November. Each stock has fallen in at least eight of the past ten years in November.

Company TIDM Avg(%)
Vedanta Resources -10.5
Royal Bank of Scotland Group (The) -8.7
Tullett Prebon -7.8
Ashmore Group -5.3
Standard Chartered -3.7

A portfolio of these five stocks would have under-performed the FTSE 350 Index in November in eight of the last last ten years with an average under-performance of 6.7 percentage points each November.

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The Stock Market in November

Of the 12 months of the years, market performance in November is only middling. Since 1970 the FTSE All Share Index has risen in 60% of years in November, with an average return over the period of 0.3%. This gives it a rank of 6th place for monthly performance. From 1980 its relative performance had been steadily increasing, but that trend reversed in 2006 – as can be seen in the accompanying chart, the market has risen only three times in November in the last nine years.

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

Sell in May

The significant feature of November is that it marks the start of the strong six-month period of the year (November to April). In other words, having reduced exposure to equities in May (”Sell in May and go away…”) investors should now be increasing exposure to the market this month (if they haven’t already done so in October).

The average November

On average the market tends to rise the first four days of the month, then to give up those gains over the following few days, rise again, fall back, until finally increasing quite strongly over the final seven trading days of the month.

Sectors

In the last twenty years the sectors that have been strong in November have been: Beverages, Fixed Line Telecommunications, Food Producers, Life Insurance, Media, Mining, Technology Hardware & Equipment and Travel & Leisure. While the weak sectors have been: Aerospace & Defense, Banks, General Industrials, and Oil & Gas Producers.

Shares

At the company level, the following FTSE 350 shares have performed best in November over the last ten years: Babcock International, Compass Group, Greene King, and Shire; the shares of these companies have all risen in November for nine of the past ten years. The shares that don’t seem to like November are: Tullett Prebon, Lloyds Banking, and CSR. And this is a busy month for interim results: 62 companies from the FTSE 350 make their announcements this month.

Elsewhere, November has been a strong month for gold and weak for oil and GBPUSD.

This is a busy month for interim results: 63 companies from the FTSE 350 make their announcements this month.

Diary

Dates to watch for this month are: 5 Nov – MPC interest rate announcement, 6 Nov – US Nonfarm payroll report, and 26 Nov – Thanksgiving Day (US), NYSE closed.


Article first appeared in Money Observer

Further articles on the market in November.

 

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Average market behaviour in December (2014)

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

Average month chart - December (2014)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 2014

The following chart shows the average performance of the market in November (1984-2013) and overlays the actual performance in November 2014.

Average month chart - November overlay November 2014 (2014)

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Average market behaviour in November

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

Average month chart - November (2014)As can be seen, historically the market has increased, with a few ups and downs, throughout November, ending the month at the month high.

October 2014

The following chart shows the average performance of the market in October (1984-2013) and overlays the actual performance in October 2014.

Average month chart - October overlay October 2014 (2014)

 

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The Stock Market in November

Since 1970 the FTSE All Share Index has risen in 59% of years in November, with an average return over the period of 0.3%. This gives it a rank of 6th place for monthly performance. From 1980 its relative performance had been steadily increasing, but that trend reversed in 2006 – as can be seen in the accompanying chart, the market has risen only twice in November in the last eight years.

Monthly returns of FTSE All Share Index - November (1982-2013)

Although the performance of the market in November is only average, the significant feature of November is that it marks the start of the strong six-month period of the year (November to April). In other words, having reduced exposure to equities in May (”Sell in May and go away…”) investors should now be increasing exposure to the market this month (if they haven’t already done so in October).

Average month

On average the market tends to rise the first three days of the month, then to give up those gains over the following few days, rise again, fall back, until finally increasing quite strongly over the final seven trading days of the month.

Sectors

In the last twenty years the sectors that have been strong in November have been: Beverages, Electronic & Electrical Equipment, Fixed Line Telecommunications, Food Producers, Life Insurance, Media, Mining, Technology Hardware & Equipment and Travel & Leisure. While the weak sectors have been: Aerospace & Defense, Banks, General Industrials, Oil & Gas Producers and Real Estate Investment Trusts.

Companies

For companies, the following FTSE 350 shares have performed best in November over the last ten years: Greene King, Babcock International, Shire, and Compass; the shares of these companies have all risen in November for nine of the past ten years. The shares that don’t seem to like November are: Tullett Prebon, Lloyds Banking, and CSR. And this is a busy month for interim results: 62 companies from the FTSE 350 make their announcements this month.

Elsewhere, November has been a strong month for gold and weak for GBPUSD

Diary

Dates to watch for this month are: 5 Nov – MPC interest rate announcement, 6 Nov – US Nonfarm payroll report, and 26 Nov – Thanksgiving Day (US), NYSE closed. And, finally, a couple of anniversaries: on 14 Nov 2007 Tesco hit its all time high (since when it has fallen 65% – at the time of writing), and 12 Nov will be the 30th anniversary of the replacement of one pound notes with coins.


Article first appeared in Money Observer

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First trading day of November

Next Monday will be the first trading day (FTD) of November.

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 0.17% on the November FTD. The index has had a positive return on this day in 67% of years since 1984.

Since 2000, the performance has been a little stronger on the November FTD, with an average return of 0.2% on the day, with positive returns seen in 79% of years.

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

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

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Shares that like/dislike November (2014)

Shares that like November

The following table lists the four FTSE 350 shares that have the best returns in November over the last ten years. For example, Greene King has an average return of 6.0% for the month of November. Each stock has risen in at least nine of the past ten years in November.

Company TIDM Avg(%)
Greene King 6.0
Babcock International Group 5.8
Shire 4.7
Compass Group 4.6

Shares that dislike November

The following table lists the three FTSE 350 shares that have the worst returns in November over the last ten years. For example, Tullet Prebon has an average return of -7.3% for the month of November. All three stocks have fallen in eight of the past ten years in November.

Company TIDM Avg(%)
Tullett Prebon -7.3
Lloyds Banking Group -5.5
CSR -3.5

An equally-weighted portfolio of the above strong November stocks would have out-performed every year an equally-weighted portfolio of the above weak November stocks by an average of 10.7 percentage points in November for the past ten years.

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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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