First trading day of August

Tomorrow will be the first trading day (FTD) of August.

Since 1984, the FTSE 100 Index has an average return of 0.06% on the August FTD, which makes it the ninth strongest FTD of the year.

The following chart shows the returns for every August FTD since 1984.
First trading day of August (1984-2013) [2014]

 

Social Share Toolbar

Last trading day of July

Tomorrow will be the last trading day (LTD) of July.

Since 1984 the index average return on the July LTD has been 0.16%, which makes it the fifth strongest month LTD of the year. The probability of a increase on the July LTD is 47%

The following chart shows the FTSE 100 Index returns for every July LTD since 1984.
Last trading day of July (1984-2013) [2014]

 

Social Share Toolbar

First trading day of July

Tomorrow will be the first trading day (FTD) of July.

Since 1984, the FTSE 100 Index has an average return of 0.48% on the July FTD (16 times the average daily return on all days), which makes it the third strongest FTD of the year. Although, as can be seen in the chart, the market has suffered two large falls in the past five years on this day.

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

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

 

Social Share Toolbar

Last trading day of June

Today is the last trading day (LTD) of June.

Since 1984 the index average return on the June LTD has been 0.18%, which makes it the third strongest month LTD of the year. The probability of a increase on the June LTD is 67%

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

Last trading day of June (1984-2013) [2014]

 

Social Share Toolbar

FTSE 100/FTSE 250 monthly switching strategy

A previous article looked at a comparison of the monthly performance the FTSE 100 v FTSE 250 indices. In this article we will look at taking the results of that study to create a trading strategy.

Analysis of the historic data shows that although the FTSE 250 Index has greatly out-performed the FTSE 100 Index in the long-term (since 1986 the FTSE 100 has increased 367% compared to an increase of 1052% for the FTSE 250) there are certain months for which the large-cap index on average out-performs the mid-cap index. We will look at a strategy that exploits this feature.

The following reproduces the chart showing the monthly out-performance of the FTSE 100 over the FTSE 250 Indices. For example, in Januaries since 1986 the FTSE 100 has on average out-performed the FTSE 250 by -1.5 percentage points.

Monthly average out-performance of FTSE 100 over FTSE 250 [1986-2014]As can be seen, there are only two months, September and October, in which the FTSE 100 convincingly out-performs the FTSE 250.

The above results suggest a strategy of investing in the FTSE 250 for the year but switching into the FTSE 100 for just the two-month period September-October. In other words, the portfolio would be invested in the FTSE 250 from January to August, at the end of August it switches out of the FTSE 250 and into the FTSE 100 for two months, then back into the FTSE 250 until the end of August the following year.

The following chart shows the result of operating such a strategy from 2000. For comparison, the chart also includes the portfolio returns from continuous investments in the base FTSE 100 and FTSE 250.

FTSE100-FTSE 250 monthly switching strategy [2000-2014]

The result: the FTSE 100 portfolio would have grown -5%, the FTSE 250 risen +153%, and the FTSE 100/FTSE 250 monthly switching portfolio would have increased +237%. These figures do not include transaction costs, but these would not be significant as the strategy only requires trading twice a year.


See also

 

Social Share Toolbar

FTSE 100 Index month end values 1984-2014

The following table shows the month-end and year-end values of the FTSE 100 Index.

NB. The FTSE 100 Index was launched on the first trading day of January 1984, but was given a starting value of 1000 assigned for the last trading day of 1983.

 

 

Social Share Toolbar

Very large one-day market gains

In a previous article we looked at very large one-day market falls, in this article we will add to the study very large one-day market gains.

First, the following chart plots the very large one-day market gains with the losses for the period 1984-2014. As before, “very large gains” is defined as daily returns over two standard deviations away from the average return; in this case that is over +2.2%.

FTSE 100 Index - very large one-day moves [1984-2014]As can be seen, there is a certain symmetry here: periods of large one-day gains seem to accompany periods of large one-days falls. This is not too surprising – a large bounceback often follows a large fall.

However, the two are not always closely synchronised. For example, although in the 30 years under study 169 days can be defined as very large one-day gains, only 26 of those large-gain days days were on days after large falls. In fact, those 169 large-gain days followed days whose average return was only -0.21% (to be compared with -2.2% which is the minimum threshold for a day to be defined as a very large fall).

It would be good to understand when these periods of higher volatility happen with respect to the prevailing market. The following chart plots the very large one-day moves and superimposes the absolute level of the FTSE 100 Index.

FTSE 100 Index and very large one-day moves [1984-2014]Putting Black Monday in 1987 to one side, from 1984 to 1997 the market displayed relatively few large one-day moves. Their frequency increased from 1997 and saw a particular high frequency during the Asian financial crisis of 1998. An interesting observation is that the frequency of large one-day moves peaks coincident with market bottoms, and not market tops. So, this can be seen in 2003, 2009 and Sep 2011

The following chart is the same as the above, but the periods of increased large one-day move frequency have been highlighted with grey boxes.

FTSE 100 Index and very large one-day moves [1984-2014] b

After the large one-day move

The following chart shows the comparative performance of the market in the 20 days following respectively a large one-day rise or fall. The Y-axis is the percentage move from the close of the index on the day of the large move. For example, by day 5 the index has risen 0.8% above the index close on the day of the large fall.

FTSE 100 average returns in the days after a large move [1984-2014]As can be seen, in the 20 days following a large fall the index has tended to rise strongly and steadily. In the 5 days following a large market rise the index tends to fall back losing some of its one-day gain, but the index then tends to recover and after 20 days has almost regained the level reached by the very large one-day rise.


See also

Other articles on large one-day returns.

Social Share Toolbar

Average market behaviour in June

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

Average month chart - June (2014)As can be seen, historically the market has on average generally been flat for the first two and a half weeks of June, and then slides in the following week.

May 2014

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

Average month chart - May overlay May 2014 (2014)In May 2014 the market traded in-line with the historic pattern in the first part of the month: strong for the first 10 days, then weakening in the following few days. But in 2014 the market was unusually strong in the final week.

Social Share Toolbar

First trading day of June

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

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 a return average of 0.21% on the June FTD, which makes it the seventh strongest FTD of the year. Although, as can be seen in the chart, the market has actually fallen on the first trading of June in the last four years.

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

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

Social Share Toolbar

Last trading day of May

Tomorrow will be the last trading day (LTD) of May.

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.

Since 1984 the index average return on the May LTD has been 0.04%, which is about same as the average daily return on all days of the year, and makes it the eighth strongest month LTD of the year.

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

Last trading day of May (1984-2013) [2014]

 

 

Social Share Toolbar