Tuesday, 6 May 2014

Stay in May and don’t fly away…

I find that I am greatly tiring of the plethora of articles which arrive around this time of year, urging investors to “sell in May and go away – come back on St Leger’s day”. Every year following May Day it is the same story but I believe the record needs to be set straight…

1. Yes, November to April is the strongest seasonal period for the FTSE 100 Index

As Figure 1 illustrates, the FTSE-100 index has typically posted its strongest seasonal performance over the six months from the beginning of November to the end of April the following year, judging from average monthly returns since 1986. December returns (including dividends) have averaged 2.6%, while April has been the second-best month at 2.1%.
1. FTSE-100 Index Has Posted Strongest Returns in December, April
Source: Author, Bloomberg
Judging from this 29-year history for the FTSE-100, May comes in as the ninth-best month for stockmarket returns, with a 0.3% – not all that impressive but nevertheless a positive average return.

2. And yes, this is true also for emerging market stocks…

Figure 2 shows the average monthly returns since 1990 for the MSCI Emerging Markets index, the main benchmark index used for investing in this geographic segment.
2. Emerging Market Stocks Show an Even More Pronounced Seasonal Effect
Source: Author, Bloomberg
In the case of emerging markets, the average return has been zero for the month of May, typically following a strong April, which has typically been the second-best month for emerging market gains.

3. The real danger period for UK stocks is between June and October

If we look at the table in Figure 3, which shows monthly returns for the thee UK FTSE stock indices by size, we can see the real danger period for stocks historically has really been June to October, with negative returns registered on average over two to three of these months.

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1 comment:

  1. As we had seen lots of changes in market in first half of May, now waiting what gonna happen in future. So don't fly as market is very uncertain.