February is the third strongest month of the year; but it hasn’t always been so strong, just six years ago it was ranked ninth of all months. In fact the market has only fallen five times in February in the last 20 years – and, of those five down years, only twice (2001 and 2009) were the falls significant, both in the wake of recent market crashes. As can be seen in the accompanying chart, currently the stock market in February is on a five-year winning streak. Over the last 30 years the market has risen in February in 60% of all years, with an average return of 1.1% – a record only beaten by the months of April and December.
In an average February the market rises for the first two-and-a-half weeks and then drifts lower for the rest of the month. The first trading day of February is usually strong; in fact it is the strongest first trading day of all months in the year.
FTSE 100 v S&P 500
This month is one of the four months in the year that the FTSE 100 Index has historically out-performed the S&P 500 Index, although the out-performance is attenuated once currency is taken into account as GBPUSD is historically weak in February.
The following FTSE 350 shares have performed well in February over the last ten years: Bunzl, Croda International, Electra Private Equity, Fidessa Group, and Jardine Lloyd Thompson Group; the shares of these Electra Private Equity and Jardine Lloyd Thompson have risen in every February for the past ten years. The shares that don’t seem to like February are: AstraZeneca, Carnival and Vodafone.
This is the busiest month for FTSE 100 results announcements – 34 companies announce their preliminary results in February (as do 53 FTSE 250 companies).
It’s a quiet month on the economics front, there will be the MPC interest rate announcement on the 5th and US non-farm payrolls on the 6th. And then the 19th of the month will see the start of the Chinese New Year; this will be the year of the sheep (or ram), which is the eighth sign of the 12-year cycle of animals of the Chinese Zodiac. And the significance of this for the stock market is..? Well, since 1950 the average annual market return has been 17.9% in the year of the sheep – the best year of the Chinese zodiac for shares!
Article first appeared in Money Observer
Further articles on the market in February.