Average market behaviour in February (2015)

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

Average month chart - February (2015)

As can be seen, historically the market tends to rise for the first two-and-a-half weeks and then drifts lower for the rest of the month.

January 2015

The following chart shows the average performance of the market in January (1984-2014) and overlays the actual performance in January 2015.

Average month chart - January overlay January 2015 (2014)

The market was unusually strong around the third week of the month, which led to its out-performance of the historic average for the month.

 

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Strong/weak sectors in February

Strong sectors

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

Sector TIDM
Chemicals
Construction & Materials
General Retailers
Household Goods
Mining
Oil Equipment, Services & Distribution

Weak sectors

The following table lists the sectors that have been weak in February.

Sector TIDM
Electronic & Electrical Equipment
Financial Services
Fixed Line Telecommunications
Mobile Telecommunications
Technology Hardware & Equipment

 

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The Stock Market in February

The performance of the market in this month has improved in recent years. Five years ago it ranked ninth of all months, whereas today it is third (just behind December and April). Since 1984 the market has risen in February in 59% of all years, with an average return of 1.0%. In fact the market has only fallen five times in February in the last 20 years; but, as you can see from the following chart, although the market usually rises in February, on the times it does fall those falls can be quite large.

Monthly returns of FTSE All Share Index - February (1982-2013)Usually a non-volatile month

But generally February has not been a volatile month. The greatest one-day rise seen in February since 1984 was 12 February 2008 when the FTSE 100 Index rose 3.5%, which ranks only 39th in largest one-day gains for the index. Similarly, the greatest one-day fall was on 20 February 2009 when the FTSE 100 fell 3.2% (only the 60th largest one-day drop for the index).

In an average February the market rises for the first two-and-a-half weeks and then drifts lower for the rest of the month. The first trading day of February is usually strong; in fact it is the strongest first trading day of all months in the year.

With January, February is the best month for mid-cap stocks relative to the large caps. On average the FTSE 250 Index outperforms the FTSE 100 Index by 1.3 percentage points in this month.

Sectors

In the last twenty years the sectors that have been strong in February have been: Chemicals, Construction & Materials, General Retailers, Household Goods and Mining; while the weak sectors have been: Electronic & Electrical Equipment, Financial Services, Fixed Line Telecommunications, Mobile Telecommunications and Technology Hardware & Equipment.

Stocks

For companies, the following FTSE 350 shares have performed well in February over the last ten years: BG Group, Bunzl, Croda International, Fidessa Group and Savills; the shares of these companies have risen in February for nine of the past ten years. The shares that don’t seem to like February are: AstraZeneca and Vodafone.

This is the busiest month for FTSE 100 results announcements – 34 companies announce their preliminary results in February (as do 53 FTSE 250 companies).

Economics diary

A quiet month on the economics front: MPC interest rate announcement on the 6th (don’t get too excited!) and US non-farm payrolls on the 7th. And, finally, 21 February will mark the 200th anniversary of The Great Stock Exchange Fraud (look it up on Wikipedia).


Article first appeared in Money Observer

Further articles on February.

 

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First trading day of February

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

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. This can be seen clearly in the chart below.

Since 1984, the FTSE 100 Index has risen on average 0.61% on the February FTD – this is 20 times the average return on all days of 0.03%. This makes it the strongest month FTD of the year. There have been positive returns on the February FTD in 59% of years.

Since 2000, the performance has been even stronger on the February FTD, with an average return of 0.93% and positive returns in 11 of the past 14 years – which make it still the strongest month FTD of the year.

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

FTSE 100 First trading day February (1984-2013) [2014]

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The UK market in February

The performance of the market in this month has improved in recent years. Five years ago it ranked 9th of all months, whereas today it is 4th.

The market has risen in February in 57% of all years, with an average return of 0.9%.

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

With January, February is the best month for mid-cap stocks relative to the large caps. On average the FTSE 250 Index outperforms the FTSE 100 Index by 1.3 percentage points in this month.

This month is one of the four months in the year that the FTSE 100 Index has historically out-performed the S&P 500 Index, on average by 0.6 percentage points in February.

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Shares that like/dislike February

Shares that like February

The following table lists the five FTSE 350 shares that have the best historic returns in February over the last ten years. For example, Fidessa has an average return of 14.9% for the month of February. Each stock has risen in nine of the past ten years in February.

Company TIDM Avg(%)
Fidessa Group FDSA 14.9
Imagination Technologies Group IMG 13.5
Croda International CRDA 9.6
Xstrata XTA 8.3
Provident Financial PFG 7.0

A portfolio of these five stocks would have out-performed the FTSE 350 Index in every February over the last ten years with an average out-performance of 9.5 percentage points each February.

Shares that dislike February

The following table lists the five FTSE 350 shares that have the worst historic returns in February over the last ten years. For example, AstraZeneca has an average return of -3.5% for the month of February. Each stock has fallen in at least seven of the past ten years in February.

Company TIDM Avg(%)
Greene King GNK -1.4
AVEVA Group AVV -1.5
Vodafone Group VOD -1.7
BTG BTG -2.5
AstraZeneca AZN -3.5

A portfolio of these five stocks would have under-performed the FTSE 350 Index in every February over the last ten years with an average under-performance of 3.3 percentage points each February.

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First trading day of February

Tomorrow, Friday 1 February, will be the first trading day (FTD) of February.

As explained in the 2013 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 average return on the February FTD has been 0.59%, and the market has risen in 57% of years; since 2000 the average return has been 0.92%

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

 

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