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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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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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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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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The UK market in December – average chart

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

Historically, December has been the strongest month in the year for the market. As can be seen in the chart, the market climbs steadily throughout the month, accelerating slightly from the middle of the month.

US election years

The following chart shows the average performance of the market in December in US presidential election years.

Unlike November, there is no great difference between the average market in December for US election years and all other years.

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General retailers start their weakest month of the year

The 2013 edition of the Almanac looks at the historic monthly performance of the FTSE 350 sectors. Here we look at the general retailers sector.

The following chart plots the average out-performance of the FTSE 350 general retailers sector over the FTSE 100 Index by month since 1999. For example, since 1999 on average the general retailers sector has out-performed the FTSE Index by 1.7 percentage points in February.

Observations:

  1. The strongest month of the year for the sector is February, and the weakest is December.
  2. After two strong months early in the year (February and March) the relative performance of the sector steadily declines for the rest of the year.

The 20 stocks in the FTSE 350 General Retailers sector [NMX5370] are-

Brown (N) Group  [BWNG] Kingfisher  [KGF]
Carpetright  [CPR] Marks & Spencer  [MKS]
Debenhams  [DEB] Moneysupermarket  [MONY]
Dignity [DTY] Next  [NXT]
Dixons Retail  [DXNS] Ocado  [OCDO]
Dunelm  [DNLM] Paypoint  [PAY]
Halfords  [HFD] Sports Direct  [SPD]
Home Retail  [HOME] SuperGroup  [SGP]
Inchcape  [INCH] TUI Travel  [TT.]
JD Sports  [JD.] WH Smith  [SMWH]
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Shares that don’t like December

The 2013 edition of the Almanac lists the 21 companies that have risen nine times or more in the last ten years in the month of December – the shares that like December.

Below is a table of the the seven stocks that dislike December – each stock has fallen in at least 8 of the past 10 Decembers – with their average returns for all Decembers since 2002.

Company Avg (%)
CML Microsystems -5.04
HMV Group -7.03
Quarto Group (The) Inc -4.71
Rank Group (The) -4.42
SkyePharma -3.53
Thorntons -6.31
Wincanton -4.81

A portfolio of these seven stocks would have under-performed the FTSE All Share Index in every December since 2002 with an average under-performance of 7.4% each December.

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