The average stock market year

What does an average year for the FTSE 100 Index look like?

The summary pages for each month in the diary section of the Almanac have charts that show the average cumulative behaviour of the market day-by-day. These charts are produced by calculating the daily mean return for each day in the trading year over a specific period (in this case from 1984).

For example, if we take the index returns on the first trading of January for the 29 years since 1985 we can calculate the average return to be 0.38%. With this we can say that on average the FTSE 100 Index increased 0.38% on the first trading day of January over the period 1984-2015. We can repeat this process for the second trading day of January, and the third, etc. until we have a set of average returns for all the trading days of January.

With this set of returns we can plot an average index for the market in January (we will set the index to start at 100). For example, the average return for the market on the first trading day is 0.38%, and so the average index would close at 100.38 on the first trading day of January.

By concatenating the average index data for each month, we can create an average index chart for the whole year. This is shown in the following chart.

The stock market average year

In the above chart we can see that, on average, the year appears to have three phases–

  • Phase 1: after a weak three weeks, the market is strong until May, then
  • Phase 2: from May to October the market is fairly flat, and then
  • Phase 3: it rises strongly in the final two months of the year.

This annual market behaviour profile concurs with what we already knew about the market, but it is illustrated simply and efficiently in this one chart.


Extract taken from the newly published The UK Stock Market Almanac 2016.

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The UK market in February

The performance of the market in this month has improved in recent years. Five years ago it ranked 9th of all months, whereas today it is 4th.

The market has risen in February in 57% of all years, with an average return of 0.9%.

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

With January, February is the best month for mid-cap stocks relative to the large caps. On average the FTSE 250 Index outperforms the FTSE 100 Index by 1.3 percentage points in this month.

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, on average by 0.6 percentage points in February.

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