The Stock Market in October

October has a bad reputation among investors. Partly justified, one might think: in 1987 the FTSE All-Share Index fell 27% in the one month of October, and then in 2008 the index fell 12% in the month. However, a glance at the accompanying chart tells a different story. In the 27 years since 1970, the UK stock market has only seen negative returns in October in six years – a record second only to December. And in recent years equities have remained strong in October, only falling in one year since 2010.

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

But, while average equity market returns in October may be better than thought, the month does have a deserved reputation for volatility. Only September can challenge it for share price fluctuations.

Sell in May/Halloween effects

The strength of equities in October may not be unconnected with the fact that the strong six-month period of the year starts at the end of October (part of the Sell in May effect) and investors may be anticipating this by increasing their weighting in equities during October. The last day of the month also tends to be strong, in fact it has the best record of any month’s last trading day – which, again, may be related to the Sell in May effect.

But while October, therefore, should be regarded as a good month for shares, any occasional weakness in the month can be severe.

The average October

In an average month for October the market tends to rise in the first two weeks, then to fall back, before a surge in prices in the last few days of the month (Sell in May effect ­ aka Halloween effect ­ again!)

Shares

In the last ten years, shares that have the strongest record in October are: Diageo [DGE], Tate & Lyle [TATE], and Whitbread[WTB]. Especially strong has been Diageo, which has seen positive returns in October in every year since 2006, with an average return in the month of 3.1%. By contrast, weak shares in October over the last ten years have been: Marshalls [MSLH], William Hill [WMH], and UDG Healthcare [UDG].

Large v mid caps

The month is one of only two months (the other is September) that FTSE 100 stocks tend to out-perform the mid-cap FTSE 250 stocks – since 1986 the FTSE 100 Index has on average out-performed the FTSE 250 Index by 0.7 percentage points in October.

Diary

Dates to watch out for this month are: 6 Oct – US Nonfarm payroll report, and 31 Oct the two-day FOMC meeting starts.


Article first appeared in Money Observer

Further articles on the market in October.

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International markets 2017 3Q YTD

The following charts plot the performance of a selection of world markets over the first three quarters of 2017. 

Domestic currency

International markets 2017 3Q YTD returns

GBP

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

International markets 2017 3Q YTD [GBP] returns

USD

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

International markets 2017 3Q YTD [USD] returns

 

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International markets 2017 3Q

The following charts plot the performance of a selection of world markets in the 3rd quarter 2017. 

Domestic currency

International markets 2017 3Q returns

GBP

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

International markets 2017 3Q [GBP] returns

USD

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

International markets 2017 3Q [USD] returns

 

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UK sector indices 2017 3Q & YTD

2017 3Q

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

UK sector index returns 2017 3Q

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

Sector TIDM Rtn(%)
Industrial Metals 47.4
Mining 12.8
Oil & Gas Producers 9.9
Beverages 8.4
General Retailers 8.0
Industrial Engineering 7.8
Chemicals 7.7
Software & Computer Services 7.2
Automobiles & Parts 6.1
Food & Drug Retailers 5.7
Oil Equipment, Services & Distribution 5.2
General Industrials 4.8
Electronic & Electrical Equipment 4.4
Personal Goods 4.3
Food Producers 3.3
Support Services 3.1
Banks 1.6
Financial Services 1.3
Equity Investment Instruments 1.2
Construction & Materials 1.1
Aerospace & Defense 1.0
Life Insurance 0.6
Forestry & Paper -0.4
Real Estate Investment Trusts -0.5
Nonlife Insurance -1.0
Real Estate Investment & Services -1.3
Travel & Leisure -2.2
Health Care Equipment & Services -2.6
Household Goods & Home Construction -2.9
Fixed Line Telecommunications -3.0
Gas, Water & Multiutilities -3.2
Electricity -3.9
Mobile Telecommunications -4.8
Industrial Transportation -5.0
Media -5.9
Pharmaceuticals & Biotechnology -6.9
Tobacco -10.2
0.0

 2017 3Q YTD

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

UK sector index returns 2017 3Q YTD

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

Sector Rtn(%)
Industrial Metals 61.7
Personal Goods 27.8
Electronic & Electrical Equipment 23.1
Forestry & Paper 20.4
Beverages 18.3
Industrial Engineering 17.1
Software & Computer Services 15.5
General Industrials 15.5
Aerospace & Defense 14.6
Financial Services 13.6
Support Services 12.7
Chemicals 12.6
Mining 11.8
Household Goods & Home Construction 11.7
Equity Investment Instruments 9.9
Nonlife Insurance 9.8
Health Care Equipment & Services 9.3
Real Estate Investment & Services 8.5
Banks 7.6
Food Producers 7.4
Travel & Leisure 7.3
Life Insurance 7.0
Automobiles & Parts 4.3
Mobile Telecommunications 3.4
General Retailers 1.1
Real Estate Investment Trusts 0.5
Construction & Materials -0.4
Tobacco -2.3
Food & Drug Retailers -2.4
Pharmaceuticals & Biotechnology -2.6
Oil & Gas Producers -3.2
Industrial Transportation -3.9
Gas, Water & Multiutilities -6.7
Media -7.9
Electricity -10.7
Fixed Line Telecommunications -21.0
Oil Equipment, Services & Distribution -22.8

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UK equity indices returns 2017 3Q & YTD

2017 3Q

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

UK equity index returns 2017 3Q

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

Index TIDM Rtn(%)
FTSE AIM 100 5.5
FTSE Fledgling 4.7
FTSE AIM All-Share 4.0
FTSE 250 2.8
FTSE SmallCap 2.3
FTSE All-Share – Total Return 2.1
FTSE 100 Index – Total Return 1.8
FTSE TechMARK Focus Index 1.7
FTSE4Good UK 1.3
FTSE All-Share 1.2
FTSE 350 1.2
FTSE 100 0.8
FTSE4Good UK 50 0.7
FTSE TechMARK All Share -0.5
FTSE UK Dividend Plus -2.8

2017 3Q YTD

The following chart plots the performance of UK equity indices over the first 3 quarters of 2017.

UK equity index returns 2017 3Q YTD

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

Index Rtn(%)
FTSE AIM 100 25.6
FTSE AIM All-Share 18.9
FTSE Fledgling 17.6
FTSE SmallCap 11.1
FTSE 250 9.9
FTSE All-Share – Total Return 7.8
FTSE 100 Index – Total Return 6.6
FTSE TechMARK Focus Index 5.5
FTSE All-Share 4.6
FTSE 350 4.3
FTSE4Good UK 4.0
FTSE TechMARK All Share 3.5
FTSE 100 3.2
FTSE4Good UK 50 2.8
FTSE UK Dividend Plus -0.9

 

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The Stock Market in September

September has not been a good month for investors. Since 1990 the average return of the FTSE All-Share Index in September has been -1.2%; the worst return of any month in the year.

However, although the average return is bad in the month, over the longer-term about half of all Septembers actually have positive returns. And, in the last 13 years, the market has only fallen in September in four years.

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

The problem is that when the market does fall in this month, the falls can be very large. For example, as can be seen in the accompanying chart, the FTSE All-Share Index has declined over 8% in three years since 2000. So, the big problem for investors in September is volatility – share price volatility is at its highest annual point in September.

Large caps v mid caps

The situation is even worse for mid-cap stocks. Since 1986, on average the FTSE 250 Index under-performs the FTSE 100 Index by 0.7 percentage points in September – making September, along with October, the worst months for mid-cap stocks relative to the large-caps

Average month

In an average month for September the market tends to gently drift lower for the first three weeks before rebounding slightly in the final week – although the final trading day (FTD) of the month has historically been one of the weakest FTDs of all months in the year.

Gold

In contrast to equities, gold tends to be strong in September: since 1968 the average gold price return in the month has been 1.8%, making September the strongest month of the year for gold. Recently, since 2000, gold’s September has been even higher at 2.3%. It should be noted that silver has also been historically strong in September.

Sectors

On the sector front, September tends to be good for Electricity stocks, Food & Drug Retailers, Mobile Telecommunications, Pharmaceuticals & Biotechnology, and relatively bad for Aerospace & Defense, Chemicals, Electronic & Electrical Equipment, General Retailers, Media, Technology Hardware & Equipment.

Diary

In the diary this month are: the US Nonfarm payroll report on the 1st, the NYSE closed on the 4th (Labor Day), ECB Governing Council Meeting on the 7th, MPC interest rate announcement on the 14th, and it’s Triple Witching on the 15th.

Sell in May…

Saturday 16th September will see horse racing at Doncaster – the St Leger Stakes. Of note for those investors who adhere to the adage “sell in May, go away and don’t come back till St Legers day”.


Article first appeared in Money Observer

Further articles on the market in September.

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FTSE 100 and FTSE 250 Quarterly Review – September 2017

After market close on 30 August 2017 FTSE Russell confirmed the following changes to the FTSE 100 and FTSE 250 indices. The changes will be implemented at the close Friday, 15 September 2017 and take effect from the start of trading on Monday, 18 September 2017.

FTSE 100

Joining: NMC Health [NMC], Berkeley Group Holdings [BKG]

Leaving: Royal Mail [RMG], Provident Financial [PFG]

FTSE 250

Joining: Royal Mail [RMG], Provident Financial [PFG], Alfa Financial Software Holdings [ALFA], 888 Holdings [888], Sequoia Economic Infrastructure Income Fund [SEQ]

Leaving: NMC Health [NMC], Berkeley Group Holdings [BKG], Northgate [NTG], Petra Diamonds [PDL], Carillion [CLLN]

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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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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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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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