Last trading day of March

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

Since 1984 the market has on average risen 0.11% on the LTD of March, with positive returns in just 50% of all years, which makes it the sixth strongest LTD of any month in the year.

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

Last trading day of March (1984-2014) [2015]

 

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First trading day of March

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

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.

However, since 1984 the FTSE 100 Index has on average fallen 0.05% on the March FTD, making it the weakest FTD of any month in the year.

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

First trading day of March (1984-2014) [2015]

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Last trading day of February

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

Since 1984 the market has on average fallen 0.06% on the LTD of February, with positive returns in just 43% of all years, which makes it the third weakest LTD of any month in the year.

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

Last trading day of February (1984-2014) [2015]

 

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FTSE 100 Index original share constituents

The table below lists the 100 shares that were constituents of the original FTSE 100 Index when it started 3 January 1984.

Allied – Lyons Imperial Chemical Industries
Associated British Foods Imperial Cont. Gas Association
Associated Dairies Group Imperial Group
Barclays Bank Johnson Matthey
Barratt Developments Ladbroke Group
Bass Land Securities
BAT Industries Legal & General Group
Beecham Group Lloyds Bank
Berisford (S. & W.) Lonrho
BICC MEPC
Blue Circle Industries MFI Furniture Group
BOC Group Marks & Spencer
Boots Co. Midland Bank
Bowater Corporation National Westminster Bank
BPB Industries Northern Foods
British & Commonwealth P & O Steam Navigation Co.
British Aerospace Pearson (S.) & Son
British Elect. Traction Co. Pilkington Brothers
British Home Stores Plessey Co.
British Petroleum Prudential Corporation
Britoil RMC Group
BTR Racal Electronics
Burton Group Rank Organisation
Cable & Wireless Reckitt & Colman
Cadbury Schweppes Redland
Commercial Union Assurance Reed International
Consolidated Gold Fields Rio Tinto – Zinc Corporation
Courtaulds Rowntree Mackintosh
Dalgety Royal Bank of Scotland Group
Distillers Co. Royal Insurance
CJ Rothschild Sainsbury (J.)
Edinburgh Investment Trust Scottish & Newcastle Breweries
English China Clays Sears Holdings
Exco International Sedgwick Group
Ferranti Shell Trans. & Trad. Co .
Fisons Smith & Nephew Associated Co’s.
General Accident Fire & Life Standard Chartered Bank
General Electric Standard Telephones & Cables
Glaxo Holdings Sun Alliance & London Insurance
Globe Investment Trust Sun Life Assurance Society
Grand Metropolitan THORN EMI
Great Universal Stores ‘A’ Tarmac
Guardian Royal Exchange Tesco
Guest Keen & Nettlefolds Trafalgar House
Hambro Life Assurance Trusthouse Forte
Hammerson Prop.Inv. & Dev. ‘A’ Ultramar
Hanson Trust Unilever
Harrisons & Crossfield United Biscuits
Hawker Siddeley Group Whitbread & Co. ‘A’
House of Fraser Wimpey (George)

Further info on the original index.

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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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First five trading days of the year

Since 1985 the FTSE 100 Index has increased on average 0.50% over the first five trading days of the new year.

The following chart shows the market returns for the first five trading days for all years from 1985. For example, over the first five days of 1985 the index rose 0.89%.

Average FTSE 100 return over first 5 trading days of the yearThe following chart shows the daily returns for the FTSE 100  for each of the five days in the new year. For example, on average since 1985 the index has risen 0.40% on the first trading day of the year.

First five trading days of the year [1985-2014]

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The FTSE 100/S&P 500 monthly switching strategy

Although since 1984 the S&P 500 has overall greatly out-performed the FTSE 100 (+1021% against +575%), there are months in the year when the FTSE 100 fairly consistently out-performs the S&P 500.

The following chart shows the monthly out-performance of the FTSE 100 Index over the S&P 500 Index since 1984.

Comparative average monthly returns of FTSE 100 v S&P 500 [1984-2014]Looking first at the orange grey bars in the chart, this shows, for example, that on average in January the FTSE 100 has out-performed the S&P 500 by -0.6 percentage points (i.e. the UK index has under-performed the US index in that month). From the chart we can see that the five months that are relatively strong for the FTSE 100 are: February, April, July, August and December. For example, the FTSE 100 has out-performed the S&P 500 in February in 13 of the past 15 years.

Now, turning to the bown bars, these display the same average monthly out-performance of the FTSE 100 over the S&P 500, except this time the S&P 500 Index has been sterling-adjusted. One effect of adjusting for currency moves is to amplify the out-performance of the FTSE 100 index in certain months (April, July, and December). Conversely, the FTSE 100 under-performance is amplified in January, May and November.

Whereas, before, the relatively strong FTSE 100 months were February, April, July, August and December, we can see that the currency-adjusted strong months are just April, July, and December.

The FTSE 100/S&P 500 monthly switching strategy (FSMSP)

The above results suggest a strategy of investing in the U.K. market (i.e. the FTSE 100 Index) in the months April, July and December and in the U.S. market (i.e. the S&P 500 Index) for the rest of the year. In other words, the portfolio would be invested in the S&P 500 from January to March, at the end of March it switches out of the S&P500 into the FTSE 100 for one month, then back into the S&P 500 for two months, into the FTSE 100 for July, back into the S&P 500 for four months, then back into the FTSE 100 for December, and finally back into the S&P 500 to start the next 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 FTSE 100 and S&P 500.

FTSE 100-S&P 500 monthly switching strategy [2000-2014]The final result: the FTSE 100 portfolio would have grown 7%, the S&P 500(£) risen 32%, but the FTSE 100/S&P 500 monthly switching portfolio (FSMSP) would have increased 114%. Switching six times a year would have incurred some commission costs, but these would not have dented performance significantly.


UK Stock Market Almanac cover [160 x 240]The above is an extract from the newly published UK Stock Market Almanac 2015.

Order your copy now!

 

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Market fall 8-12 December 2014

Last week the FTSE 100 Index fell 442 points (-6.6%), losing £121bn in market capitalisation. It was the largest weekly fall since August 2011, and the 14th largest weekly fall ever for the FTSE 100 Index (created in 1984).

The following chart shows the 10 FTSE 100 stocks that fell the most last week.

FTSE 100 fall 8-12 Dec 2014 [by price]

Petrofac shares were down 12.9% last week, the largest faller, followed by Tesco (-12.6%).

The following chart shows the 10 stocks that saw the greatest absolute falls in market capitalisation – i.e. these were the stock that had the greatest impact on the FTSE 100 Index. The chart shows the proportion of the 442 point fall in the FTSE 100 Index that was attributable to each stock. For example, 10.3% (46 points) of the FTSE’s fall last week was due to the fall of the share price of Shell.

FTSE 100 fall 8-12 Dec 2014 [by mkt cap]

The above 10 companies accounted for 47% of the FTSE 100 fall.

The following table shows the three sectors that were most responsible for the FTSE 100 fall last week.

Sector MktCap lost (£m)
Oil & Gas 22,820
Banks 17,227
Mining 12,029

 

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The Santa Rally

The average return of the FTSE 100 Index on the first trading day of December since 1984 is -0.04%. We can also calculate the average return of the FTSE 100 Index on the second trading day of December – this happens to be 0.03%. We can continue this process until we have calculated the average return for the Index on each trading day of December since 1984.

With these average daily returns, we can calculate a theoretical average FTSE 100 Index for the month of December. If this theoretical index starts at 100 then the index will have a value of 99.96 on the first day (after a fall of 0.04%), and 99.99 on the second day.

The following chart plots the values of this theoretical average FTSE 100 index calculated from the average daily returns for December.

Average month chart - December (2014)Starting at 100 the theoretical index ends the month at 102.5 – reflecting the fact that the average return for the FTSE 100 Index for the whole month of December is 2.5%.

One of the most remarkable features of this chart (and in fact for the whole year) is the strong performance of the market from the middle of the month. This surge in equities has been termed the Santa Rally (or the Christmas Rally).

From the above chart it can be seen that on average the Santa Rally starts on the 10th trading day of the month.

Santa Rally [2014] In the year 2014, the 10th trading day is the 12th December.

 

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