In recent years, the stock market has been noticeably weak in the autumn month, says Stephen Eckett.
Since 1990, the FTSE All-Share index has seen an average return of 0.6 per cent in November, with positive returns in 15 of the past 28 years. This ranks it in the middle of the 12 months for equity performance. However, in recent years the market has been noticeably weak in November: the index has only seen positive monthly returns in four of the past 12 years.
The most significant feature of November is that it marks the start of the strong six-month period of the year from November to April (an aspect of the Sell in May effect). In other words, investors should be increasing their exposure to the market this month (if they haven’t already done so in October).
Another feature of the month in recent years has been its low volatility: since 2000 the volatility of shares in November has been the lowest of any month.
In an average November, the market rises in the first three days, but those gains are then given up in the following few days. In the middle of the month, prices increase and then fall back again, before finally rising strongly in the last seven days of the month.
In the past 10 years the FTSE 350 sectors that have performed strongly in November have included food producers, aerospace and defence, and media.
The weak sectors have been oil equipment, services and distribution, real estate investment trusts and industrial transportation. This is a busy month for interim results: 64 companies from the FTSE 350 make their announcements in November.
November has tended to be a strong month for gold and weak for the pound against the dollar.