Stockmarkets thrive in February
February is the third strongest month of the year in the stockmarket. The UK market has risen in the month in 60% of the past 30 years, returning an average of 1.1% – returns are only surpassed by those in April and December.
It has fallen just five times in February in the past 20 years, and in only two of those five years (2001 and 2009) were the falls significant – both came in the wake of market crashes.
The stockmarket in February is on a five-year winning streak. But this month hasn't always been strong: just six years ago it was ranked ninth.
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 is usually strong; in fact it is the strongest first trading day of all months.
This month is one of the four months in the year when the FTSE 100 index has historically outperformed the S&P 500, although the out-performance is attenuated once currency is taken into account, as sterling is historically weak relative to the dollar in February. It is also the busiest month for FTSE 100 results announcements: 34 companies announce their preliminary results in February (as do 53 FTSE 250 companies).
February 19 marks the start of the Chinese new year. The coming year will be the year of the sheep (or ram), which is the eighth sign of the 12-year cycle of animals in the Chinese zodiac. It's worth noting that 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.
This article was written for our sister publication Money Observer
A market-weighted index of the 100 biggest companies by market capitalisation listed on the London Stock Exchange. It is often referred to as “The Footsie”. The index began on 3 January 1984 with a base level of 1000; the highest value reached to date is 6950.6, on 30 December 1999. The index is “weighted” by how the movements of each of the 100 constituents affect the index, so larger companies make more of a difference to the index than smaller ones. To ensure it is a true and accurate representation of the most highly capitalised companies in the UK, just like football’s Premier League, every three months the FTSE 100 “relegates” the bottom three companies in the 100 whose market capitalisation has fallen and “promotes” to the index the three companies whose market capitalisation has grown sufficiently to warrant inclusion. Around 80% of the companies listed on the London Stock Exchange are included in the FTSE 100.