DIY Investor Magazine
|
June 2017
12
JUNE MARKET
SEASONALITY EFFECTS AND ANOMALIES
The latest edition of Stephen Eckett’s fascinating reference book may have you scratching your
head in search of a rational explanation for what is presented, but one thing is for sure, you’ll
return to it again and again as 2017 unfolds.
THE UK STOCK MARKET ALMANAC 2017
MARKET PERFORMANCE THIS MONTH
June is not a good month for shares; historically, the
May/June has been the weakest two-month period in
the year for the equity market. On average, the market
has fallen 0.9% in June and the probability of a positive
return in the month is a lowly 39% – ranking it 11th of all
months in the year.
Since 2000, the situation has been even worse with the
average return in the month -1.7%, and market falls can
be quite large; the market has fallen over 3% in June in
eight years since 1982.
In an average June the market starts strong, hitting
its month high on the second or third trading day, but
prices then drift down steadily for the rest of the month
(the third week is the second weakest of all weeks in
the year). The market does tend to end the month on a
positive note – the last trading day is the third strongest
in the year.
SELL IN MAY AND COME BACK... WHEN?
The original saying goes ‘sell in May and go away, don’t come back till St Leger Day – the last big event of the
UK horse-racing calendar and usually takes place in mid-September. A complementary anomaly, originating in
the US, is the ‘Halloween Effect’ which holds that stocks see the bulk of their gains in the six-month period 31st
October to 1st May. Somewhere along the line ‘sell in May’ and the Halloween Effect merged to become one, such
that the summer period of (relatively) poor returns ends on 31st October.
