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]

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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]

 

 

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Comparison of monthly performance FTSE 100 v FTSE 250

Recently we have looked at the monthly seasonalities of the FTSE 100 and FTSE 250 Indices. Here, we will look at the comparative monthly performance of the FTSE 100 Index against the FTSE 250 Index.

The following table shows the out-performance of the FTSE 100 over the FTSE 250 for every month since 1986 (the year of introduction of the latter index). For example, in January 1986 the FTSE 100 month return was 1.6%, that for the FTSE 250 was 2.6%, and so the out-performance of the FTSE 100 over the FTSE 250 was -1.0 percentage points. Negative values (i.e. those months when the FTSE 250 out-performed the FTSE 100)  are highlighted with a blue cell background.

Monthly out-performance of FTSE 100 over FTSE 250 [1986-2014]As can be quite clearly seen the FTSE 250 has been strong relative to the FTSE 100 for the three months January to March.

This can also be seen in the chart below which shows the average FTSE 100 out-performance of the FTSE 250 for each of the 12 months since 1986. For example, on average in January the FTSE 100 has under-performed the FTSE 250 Index by 1.5 percentage points.

Monthly average out-performance of FTSE 100 over FTSE 250 [1986-2014]This average comparative chart shows that the FTSE 250 has been significantly strong relative to the FTSE 100 Index January-March, and relatively weak September-October.


See also

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FTSE 100 Index monthly seasonality

The following table shows the month returns for the FTSE 100 Index for every month since 1980. For example, in January 1985 the FTSE 100 Index rose 3.9%. Negative month returns have been highlighted with a blue cell background.

FTSE 100 Index month returns [1980-2014]A quick glance at the distribution of blue cells in the above chart suggests that the FTSE 100 Index has been strong in December and weak in June.

These observations are supported by the chart below which shows the average month returns for each month over the same period.

FTSE 100 Index average month returns [1980-2014]From this chart we can see the FTSE 100 Index has historically been strong in April and December; and weak in June and September.


See also

Previous article on FTSE 100 monthly seasonality.

Similar analysis for the FTSE 250 Index.

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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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