New 2017 edition of the Almanac just published


The new edition of the Almanac, The Harriman Stock Market Almanac 2017, has just been released.

The Almanac is a unique reference work providing traders and investors with the data to tackle the markets in the year ahead.

The 2017 edition is packed with new research. New strategies and studies appearing in the Almanac for the first time include-

New research

  • World’s Simplest Trading System ­ a simple trading system based on moving averages with an impressive performance.
  • Construction Sector 4M Strategy ­ exploits a seasonality anomaly of the construction sector.
  • Sell In May Sector Strategy ­ how to exploit the Sell in May effect with sectors.
  • Turn Of The Month Strategy ­ all the market’s gains occur in just six days around the turn of the month.
  • January Barometer ­ do the first five trading days of the year predict the full year?
  • Odd/even weeks ­ the market in odd weeks greatly out-performs that in even weeks.
  • Santa Rally ­ does a Santa Rally exist for shares and, if so, when does it start?
  • Santa Rally Portfolio ­ the 10 stocks that have had positive returns over the two-week Santa Rally period for every year since 2007.
  • Sell in May and come back…when? ­ if you sell in May when should you come back into the market?
  • Up/Down ratio ­ analysis of the correlation between the ratio of up/down days in a year and the overall annual return of the FTSE 100 Index.
  • Solar eclipse ­ do solar eclipses affect stock markets?
  • Dividend payment calendar ­ analysis of when FTSE 100 companies pay dividends throughout the year.
  • FOMC cycle ­ the equity premium in the US and worldwide is earned entirely in weeks 0, 2, 4 and 6 in FOMC cycle time.
  • The psychology of drawdowns ­ why investors may almost always feel a prevailing sense of loss.
  • Do European stocks follow the US on a daily basis? ­  analysis of the correlation of EuroSTOXX and S&P 500.
  • Fed rate cycle ­ analysis of the relationship between the Fed rate cycle and UK equities.
  • UK bank rate since 1694 ­ analysis of Bank of England base rate changes over the last three centuries.

Order your copy now!


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Day of the week grid

We have previously looked at data to see if there are any discernible patterns in market returns by day of the week. The following table presents another way of studying this.

The table shows the daily returns of the FTSE 100 Index for every day so far in 2016 (up to last Friday, 28 Oct). Positive returns are highlighted in green, negative returns in red. (White cells indicate a market holiday.)

Day of the week grid [2016 wk43]


  1. So far in 2016 the longest run of positive (or negative) returns for a day started in the 10th week of the year when day returns for eight consecutive Wednesdays were positive.
  2. For 11 weeks, the day returns on Fridays were the opposite sign to that on the previous day (Thursday). This run ended last Friday (when both Thursday and Friday saw positive returns).

Other articles looking at returns on days of the week.

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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]


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.


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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Last trading day of October

Next Monday will be the last trading day (LTD) of October.

Historically, the last trading day of October has been the strongest LTD of any month in the year. Since 1984 the market has on average risen 0.46% on the LTD of October, with positive returns in 69% of all years.

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

FTSE 100 last trading day of October [1984-2015]

As can be seen on the chart the market only fell twice on the October LTD in the 19 years from 1984 to 2002. One possible reason for this may have been that November is the start of the strong six month period of the year (this is part of the Sell in May effect), and investors could have been buying equities at this time in anticipation of that.

However, in recent years this pattern of behaviour has changed. Quite dramatically so – in the last seven years the market has only risen once on the October LTD. Last year (2015) the FTSE 100 Index was down 0.5% on the last trading day of October.

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30 years since Big Bang

In the early 1980s the Office of Fair Trading brought a case against the London Stock Exchange, citing a range of restrictive practices which included:

  • fixed minimum commissions for stock trades
  • separation of brokers (who acted as agents for customers) and jobbers (market makers)
  • foreign membership of the stock exchange was not allowed

As a result the Exchange changed its rules which came into effect on 27 October 1986 (30 years ago today).

The effect on the financial industry in the UK – especially the City in London - was dramatic, such that this process of de-regulation is also referred to as Big Bang.

One of the greatest changes was the acquisition of many established City firms by foreign (mainly American) banks. This led to great debate of something called the Wimbledon Effect – i.e. whether an economy needs strong domestic competitors or if it can thrive by merely providing the forum for foreign-owned institutions.

Overall, London has thrived as a financial center since Big Bang and the deregulation has been seen as beneficial for financial markets. Although in 2010 Nigel Lawson, the Chancellor in 1986, admitted that the global financial crisis starting in 2007 was an unintended consequence of Big Bang. The problem being that previously investment banks had been careful with their own money, but merger with high street banks gave them access to depositors’ funds. and incorporation as limited liability companies removed the personal risk for managers (the principal–agent problem).

Below is an extract taken from George G. Blakey’s magisterial A History of the London Stock Market 1945-2007 to give a flavour of the market in 1986, the year of Big Bang.

Markets opened the New Year with a broad advance, but after hesitating on the political upset created by the Westland affair, which led to the resignation of two Cabinet ministers, Michael Heseltine and Leon Brittan, and a 1% increase in base rates to steady the pound after a sharp drop in the oil price, they recovered to close the month at record levels. There was no doubt that sentiment was aided by the sight of predators being willing to compete with each other and pay ever higher prices for what had once been thought of as rather dull companies. Thus Imperial Group and Distillers went for £2.5 billion each, some 25% above the opening bids, in hard-fought and no holds barred contests between determined bidders.

Markets were under something of a cloud in November and December as one scandal after another came to light. First of all Geoffrey Collier, a senior executive at Morgan Grenfell, resigned after insider dealing allegations. Then US arbitrageur, Ivan Boesky, who had been an active participant in many of the year’s big bids in the UK, was fined $100 million by the SEC. After weeks of rumours, December saw a DTI investigation ordered into the Guinness takeover of Distillers, closely followed by the revelation that Guinness had “invested” $100 million in Boesky’s arbitrage pool of funds. On the last day of the year, Roger Seelig, the Morgan Grenfell executive who had looked after the Guinness bid, resigned from his post at the bank.

Although these events were truly exceptional in the light of the high standing of the persons and the companies involved, they did not prevent a good Christmas rally developing in a market which also had to absorb the £5.6 billion offering from British Gas. The advent of dual capacity and automated quotations with Big Bang in October seemed to have no particular influence on the course of markets at the time. The FT 30 closed the year at 1313.9, well below its peak, but still a gain of 15.5%, while the broader- based All Share and FTSE were up 20% and 23.5% at 835 and 1679 respectively. Government Securities were up a modest 1.25% at 83.62. The Dow recorded a gain of 22.5% closing at 1896.


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CAPS Portfolio

A fun Quartz article found that a portfolio comprised of U.S. companies whose names were all upper case (e.g. NVIDIA) had out-performed the S&P 500 Index in 2016. The article’s explanation: confident companies have confident names!

How would such a portfolio fare in the UK?

The following table lists the 14 FTSE 100 companies with (almost) all upper case names. Included in the table are the returns from the beginning of 2015.

Company TIDM Rtn (from 2015)
BP BP. 39.9
CRH CRH 36.8
RSA RSA 31.2
DCC DCC 18.5
FTSE 100 UKX 12.4
BAE Systems BA. 8.2
TUI AG TUI -15.0
BT BT.A -17.8
ITV ITV -38.4

And the following chart plots the performance of an equally-weighted portfolio of the 14 upper case companies benchmarked against the FTSE 100 Index.

CAPS portfolio

As in the US case – it works!

Why do investors bother with anything more complicated?

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Trading days around US presidential elections

How does the UK market trade in the days around US presidential elections?

US presidential elections are held every fours years on the Tuesday following the first Monday in November (hence they are always between 2nd and 8th November). The newly elected president takes office at midday on Inauguration Day (20 January the following year).

In 2016 the US presidential election will take place on 8 November.

The table below shows the results of analysing the FT All-Share index for the 9 days around each US election since 1972.

  • Days 1-4: are the four trading days leading up to the election
  • Day 5: is the election day
  • Days 6-9: are the four trading days following the election
Day 1 2 3 4 5 6 7 8 9
Proportion of days up(%) 45 73 64 55 64 55 45 55 45
Average daily return(%) 0.56 0.33 0.39 0.36 0.64 -0.18 -0.49 0.29 -0.39
Standard deviation 2.45 0.66 1.11 1.05 1.35 0.95 2.09 1.17 1.28

The average return for each day is shown in the chart below.

FTSE All-Share around US presidential elections [1972-2012]

As can be seen, the UK market tends to trade stronger in the four days before the election, and is weaker in the few days following the election. The strongest day of the period has been the election day itself.

The above is an extract from the Harriman Stock Market Almanac.

See also: other articles on politics and markets.

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Which index should you be tracking?

How do you calculate the average performance of a stock market?

This is a harder question to answer than it may at first seem. For example, the FTSE 100 Index is a measure of the aggregate market capitalisation of the 100 companies in the index. The problem is that the index is greatly influenced by the larger companies in it (the five largest companies in the index account for 27% of the total market capitalisation, while the 21 smallest companies in the index account for only 5% of total capitalisation).

So, how representative is the FTSE 100 Index of the average performance of the 100 component companies?

In the following chart the bars shows the proportion of FTSE 100 companies that out-performed the index in each year for the period 2005-2015, and for reference the line plots the index value. For example, in 2005 55% of the FTSE 100 companies out-performed the index.

Proportion of companies outperforming the FTSE 100 Index [2005-2015]

As can be seen there is quite a range of annual behaviour here: in 2007 46% of companies out-performed the index, while in 2012, 77% of companies out-performed. In other words, tracking the FTSE 100 Index in 2012 resulted in under-performing 77% of the individual stock performance. In only year, 2007, less than 50% of stock out-performed the index.

For comparison the following is a similar chart to that above, but this time for the FTSE 250 Index.

Proportion of companies outperforming the FTSE 250 Index [2005-2015]

As can be seen, for the mid-cap index the variability of the proportion of out-performers is far less than for the large-cap index, and the years of individual companies out and under-performance are evenly matched.

A reason for this is that size disparity is greater within the FTSE 100 than the FTSE 250: in the former the largest company has a market capitalisation 47  times greater than the smallest company in the index, the equivalent figure for the FTSE 250 is 10 times.

Equally-weighted indices

In 2015 the indexing company FTSE Russell introduced a new index to address this. The index is called the FTSE 100 Semi Annual Equally Weighted Index, and each of the 100 companies in the index is given a weight of 1% (that is re-balanced every six months).

NB. Deutsche Bank launched an ETF tracking this index, ticker: XFEW).

Such an index is sometimes called a price-weighted index. Before the age of computers it was common to calculate stock indices this way. For example, the FT 30, Dow Jones Industrial Average, and Nikkei 225 were (or are still) price-weighted indices.

If an investor believes that larger stocks will underperform smaller stocks for a period, then switching out of a traditional market-cap weighted tracker (such as a FTSE 100 ETF) into an equally-weighted tracker  may make sense.

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Gold and US presidential elections

How has the price of gold reacted to US presidential elections?

Day returns

The following chart plots the average daily returns of gold for the nine days around the US presidential elections (1968-2012). So, the chart covers the period of the 4 days before the election and the 4 days after. For example, for the 12 US presidential elections from 1968 the price of gold has increased on average 0.2% on the day of the election itself (D0).

Gold and US presidential elections [1968-2012] (1)

As can be seen…well, in fact, nothing much can be seen as there’s no clearly discernible pattern of behaviour here.

Let’s now see if there’s any significant difference in behaviour depending on whether a Democrat or Republican wins the election.

The following chart plots the average daily returns for gold for the election day and four following days. The averages are split as the  average for the five times a Democrat has won compared to the seven times a Republican has won.

For example, in the five elections that a Democrat has won the White House, the average daily return of gold the day following the election (+1D) has been 1.1%.

Gold and US presidential elections [1968-2012] (2)

Generally, the price of gold has been stronger following a Democrat win, and especially strong on the day following the election.

Let’s now zoom out time-wise and look at gold’s month returns around the elections.

Month returns

The following chart shows gold’s average month returns for the three months before, and three months after, US presidential elections.

Gold and US presidential elections [1968-2012] (3)

Historically, the gold price has been weak in the month leading up to the election (-1M) with an average month return of -1.8%. Following the election the price has tended to bounce back, with an average return in the following month of 1.1%.

The following chart plots the proportion of months seeing positive returns in these six months around the election. For example, the price of gold has only risen four times in the month before an election in the 12 elections since 1968.

Gold and US presidential elections [1968-2012] (4)

This chart largely supports the the observation in the preceding chart which is that the price of gold is weak in the month preceding an election, and strong in the following month.

Now to see if there is any difference in the behaviour depending on whether Democrat or Republican wins the White House.

Gold and US presidential elections [1968-2012] (5)

In the month following an election gold has risen on average 1.7% if a Democrat won, and 0.7% if a Republican won. The performance differential becomes more pronounced in the second and third month after the election – with gold seeing month returns of over 4% in the case of a Democrat win, and negative month returns in the case of a Republican win.

Caveat: this analysis involves a very small sample size (there have been just 12 elections since 1968) so the results can not be regarded as statistically significant. But, given that caveat, it does seem that gold loves Democrats!

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