Since 1984 the FTSE 100 Index has risen in 59% of years in November, with an average return over the period of 0.7%. This gives it a rank of 6th place for monthly performance. Although this performance is only average, the significant feature of November is that it marks the start of the six-month strong half of the year (November to April). In other words, investors should be increasing exposure to the market this month (if they haven’t already done so in October).
The accompanying chart plots the percentage performance of the FTSE All Share Index for each November since 1982. For example, last year in 2012 the market rose 1.4% in November.
On average the market tends to rise the first three days of the month, then to given up those gains over the following few days, rise again and fall back, until finally increasing quite strongly over the final seven trading days of the month. It could be noted in passing that November holds the record for the greatest ever one-day increase in the FTSE 100 Index: on 24 November 2008 the index rose 9.8%!
In the last twenty years the sectors that have been strong in November have been: Beverages, Electronic & Electrical Equipment, Fixed Line Telecommunications, Food Producers, Life Insurance, Media, Mining, Technology Hardware & Equipment and Travel & Leisure. While the weak sectors have been: Aerospace & Defense, Banks, General Industrials, Oil & Gas Producers and Real Estate Investment Trusts.
For stocks, the following companies have performed well in November over the last ten years: Babcock International Group, Compass Group, Premier Farnell, Shire and Tate & Lyle. The shares that don’t seem to like November are: AstraZeneca, Greggs, Herald Investment Trust, Rentokil Initial and Tullett Prebon.
An interesting strategy to consider in November is to pairs trade Shell and Exxon. Since 2000 Shell shares have out-performed those of Exxon (priced in sterling) in November by an average 3.7 percentage points. The strategy would be to go long of Shell and short of Exxon the end of October and close the positions the end of November.
November is the third busiest month for interim results analysis: 62 companies from the FTSE 350 make their announcements this month.
The only significant economics date this month is the MPC interest rate announcement on 6 November; and there will be a MSCI quarterly index review announcement on the 12th.
Article first appeared in Money Observer