Even when the market does rise in August, the returns are small
The UK equity market has displayed rather irregular behaviour in August since 2011, alternating mildly positive returns for the month in even years with large negative returns in odd years. However, that pattern broke down in 2017, when the market delivered a small return (0.7 per cent) in an odd year.
Besides the odd pattern, except in the anomalous years of 2008 and 2009, since 2000, even when the market does rise in August, the returns are small, as can be seen in the chart.
From 1970 the average return for August from the FTSE All- Share index has been 0.7 per cent, with 63 per cent of years seeing a positive return in the month. But since 2000 performance has declined and the average return has fallen to zero. August now ranks ninth among all months of the year in terms of market returns.
The strongest sectors in August over the past 10 years have included oil equipment services and distribution; gas, water and multi-utilities; and software and computer services. The weakest sectors have been fixed-line telecommunications, mining, and oil and gas producers.
Over the past 10 years FTSE 350 stocks that have tended to perform well in August have included James Fisher & Sons (FSJ), Petrofac (PFC) and Synthomer (SYNT). Those first two stocks have seen positive returns in August in nine out of 10 years. By contrast, among the FTSE 350 stocks that have tended to perform poorly in the month are Standard Chartered (STAN), Rio Tinto (RIO) and Vedanta Resources (VED). Rio Tinto has fallen in every August since 2007.
Significant dates this month include the MPC interest rate announcement on 2 August, the US non-farm payroll report on the 3rd and the MSCI quarterly index review announcement on the 13th.