Average market behaviour in May

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

Average month chart - May (2014)As can be seen, historically the market has on average generally risen very gently for the first two weeks of the month and then sold off in the second half to finish down on the month.

April 2014

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

Average month chart - April overlay April 2014 (2014)

In April 2014 the market traded in-line with the historic pattern in the first and final two weeks of the month, but was abnormally weak in the second week.

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First trading day of May

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

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 0.08% on the May FTD, which makes it the fourth weakest FTD of the year. From 2000 the May FTD return average has been even weaker at 0.03%.

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

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

 

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Last trading day of April

Tomorow will be the last trading day (LTD) of April.

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 April LTD has been 0.17%. From 2000 the index average return on this day has been weaker at 0.09%.

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

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

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Monthly performance of FTSE 100 Index

Does the FTSE 100 Index display a monthly seasonality?

Average returns

The following chart plots the average monthly performance of the FTSE 100 Index for each month over the period 1980-2014. For example, over the 34 years from 1980 the average return of the index in April was +2.2%, and in May it was -0.3%,

FTSE 100 Index average returns by month [1980-2014]Notes

  • The highest average return was seen in April (+2.2%), closely followed by December (+2.1%).
  • The lowest average return was in September (-1.1%). Only three months (May, June, September) had negative average returns over the period.
  • The Sell in May (Halloween) effect can be seen illustrated here: the period May-Oct is the weaker half of the year, and Nov-Apr the stronger half.

Positive returns

The following chart plots the proportion of monthly returns that were positive for each month. For example, the index rose in April in 74% of the years since 1980, and in 47% of the years for May.

FTSE 100 Index positive returns by month [1980-2014]Notes

  • As can be seen the overall relative profile of strong/weak months is the same as that for the average performance figures. The one difference is October: here the month has the second highest proportion of positive monthly returns, but (from the first chart) ranks only sixth in terms of average returns. This reflects the fact that the market is generally strong in October, but its average return is brought down by the occasional very large falls in the month (e.g. 1987).

Cumulative returns

The following chart shows the cumulative returns indexed to 100 for each month. For example, £100 invested in the FTSE 100 only in the month of April over the period 1980-2014 would have grown to £203, while in May £100 over the 34 years would have fallen in value to £88. The six months of the weak half of the year (according to the Sell in May effect) are indicated with dashed lines.

FTSE 100 Index cumulative returns by month [1980-2014]Notes

  1. The observations from the first two charts (i.e. the strength of Apr and Dec and the weakness of Sep), can be seen clearly in this chart as well.
  2. Historically, January was the strongest month of the year (and this is still the case in some countries).As can be seen, January was the strongest month for the FTSE 100 Index until the beginning of the millennium, since when its performance has fallen off quite dramatically.
  3. Until 2005, November’s cumulative return was close to that of December’s.
  4. The low volatility and close correlation of April and December returns are striking.
  5.  Very broadly, the collection of dotted lines towards the bottom on the chart supports the Sell in May effect (i.e. the market is relatively weak May-Oct).

See also

Other articles on the Sell in May effect.

 

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Easter holidays and the stock market

What impact, if any, does the Easter holiday have on the market?

A previous post looked at the behaviour of the market around holidays (sometimes referred to as the holiday effect). In this post we will narrow the focus to look at the behaviour of share prices around the Easter holiday.

The following chart shows the average daily returns for the FTSE 100 Index for the four days before, and three days after, the Easter holiday over the period 1984-2013.

Average daily returns of the FTSE 100 around Easter [1984-2013]The general profile of behaviour around Easter is similar to that seen before for all holidays.

The main differences are that H(-4) is significantly weak, and the average returns for the two days immediately before and after Easter are significantly higher than for all holidays. For example, the average return for H(-1) is 0.4% (13 times greater than the average return for all days in the year); for all holidays the figure is 0.2%. The standard deviation for the Easter H(-1) average return is also significantly low.

The following chart is similar to the above, but this time the period studied is 2000-2013.

Average daily returns of the FTSE 100 around Easter [2000-2013]This second chart suggests that the behaviour of the market around Easter has not changed significantly in recent years.

 

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Average market behaviour in April

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

FTSE 100 average month chart for April [1984-2013]As can be seen, historically the market has on average generally risen steadily throughout the whole month of April, ending at the high for the month.

March 2014

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

Average month chart - March overlay March 2014 (2014)In March 2014 the big difference from the average March was the weakness in share prices in the first two weeks of the month.

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2014 1Q market review – comparative performance of FTSE 350 sectors

The following chart shows the performance of the FTSE 350 stock sectors in the first quarter 2014.

FTSE 350 sector performance 2014 1Q26 of the 38 sectors out-performed the FTSE 100 Index in the first quarter of 2014.

The data for the above chart are given in the following table.

FTSE 350 Sector TIDM Rtn 2014 1Q (%)
General Retailers 11.2
Oil Equipment, Services & Distribution 11.1
Real Estate Investment & Services 7.8
Construction & Materials 7.4
Health Care Equipment & Services 7.1
Real Estate Investment Trusts 5.3
Electricity 5.0
Automobiles & Parts 4.6
Household Goods 4.1
Food Producers 3.4
Tobacco 3.2
Gas, Water & Multiutilities 3.0
Industrial Engineering 2.5
Pharmaceuticals & Biotechnology 2.5
Chemicals 2.2
Financial Services 2.2
Software & Computer Services 2.2
Support Services 1.8
Industrial Transportation 1.7
Mining 1.4
Nonlife Insurance 1.2
Travel & Leisure 0.5
Equity Investment Instruments 0.3
Forestry & Paper 0.3
Fixed Line Telecommunications 0.2
Life Insurance -1.9
FTSE 100 -2.2
Oil & Gas Producers -2.6
Technology Hardware & Equipment -4.0
Beverages -5.7
Media -5.9
Electronic & Electrical Equipment -6.1
Personal Goods -6.2
Banks -8.8
General Industrials -8.8
Aerospace & Defense -9.3
Mobile Telecommunications -10.3
Food & Drug Retailers -11.0
Industrial Metals -24.7

 

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First trading day of April

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

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 0.5% on the April FTD, which makes it the second strongest FTD of the year. The index has risen on the April FTD every year since 2003. Since 2000 the April FTD average return has been even higher at 0.82%.

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

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

 

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Last trading day of March

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

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 March LTD has been 0.12%. Since 2000 the index average return on this day is 0.27% (of course, this figure is skewed by the huge 4% rise in the index on the LTD of March in 2009).

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

 

 

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