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%.
The 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.
The Almanac has already covered the market behaviour on the first and last trading days of the month; this study widens the analysis to look at the behaviour of the market on the 10 days around the turn of the month (TOM).
The days studied are the 5 last trading days of the month, from ToM(-5) to ToM(-1) (the latter being the last trading day of the month), and the first 5 trading days of the following month, from ToM(+1) to ToM(+5). The index used is the FTSE All Share.
The charts below analyse the 532 TOMs since 1970. The first chart shows the average daily return for the index on the 10 respective days. The second chart shows the proportion of positive returns on those days.
For example, on ToM(-5) the market has on average risen 49.6% of the time with an average return of -0.03%.
We can see that there is a definite trend for the market to be weak at the beginning of the 10-day period, to then strengthen around the turn of the month, and afterwards to weaken again.
Does this behaviour persist in more recent years?
The charts below are the same configuration as above, except they look at the shorter time period: the 172 ToMs since the year 2000 to 2014.
Broadly, the behaviour has been similar for the last few years as that from 1970. The main observation is that the strength of the first trading day of the month, ToM(+1), has become ever more pronounced. On average the market has risen 66% of all ToM(+1) with an average change of 0.31% (which is ten times the average change on all trading days).
Reference – papers on Turn of the Month
[Papers listed in reverse date order]