Dig deep: Investment season is upon us

We have entered the strongest season for investing, particularly in junior companies, which makes the timing of the Mines and Money London conference highly propitious.

Go to the profile of Chris Hinde
Nov 04, 2019
0
0

Seasonally, we have entered the strongest two-month period of the year. According to the Stock Trader's Almanac, November is the second best month for investing in the S&P 500 since 1950, and December is the top-ranked month.

This data is supported by research from Brewin Dolphin on the best time to invest in a FTSE All Share tracker over the past 35 years. The wealth manager found that, on average, UK investors have made less than 0.6% per month over the first 10 months of the year but 1.3% per month over the final two months of the year. Indeed, November and December outperformed the rest of the year in 25 of the 35 years analysed.

John Moore of Brewin Dolphin said: "The data suggests that history is on the side of the winter optimists". Reasons include corporate updates at this time of the year and forecasts (often optimistic) for the New Year.

Tom Becket, chief investment officer at Psigma Investment Management, told the financial website 'This is Money' that equity markets "tend to have their strongest period in the final few months of the year as people tinker with their portfolio based on what has happened over the previous 12 months, and optimism kicks in for the coming year". Also, stock markets tend to be quieter across the summer months when financial firms traditionally take holidays.

According to 'The Definitive Guide to Financial Market Returns' by Jeremy Siegel, the return of investors at the beginning of the New Year has traditionally pushed up equity prices, especially for the small-cap and 'value' stocks.

Indeed, money invested between November and April often performs far better than investments made between May and October (hence the British adage of "sell in May and go away"). Investment group Architas has calculated that money invested in the FTSE All Share each year between November 1 and April 30 would have grown by 167% over the past 22 years. Cash invested during these six months would have delivered an average return of 8.4% a year over that period, compared with just 1.3% for money invested from May 1 to October 31.

The trend is not restricted to the UK, with stock markets in each of the major investment regions across the world delivering better returns in the six-month window from November 1 than in the period after May 1. Over the past 18 years, the Japanese market, for example, has returned an average 11.8% a year during November 1 to April 30, whereas an investment in Japan between May 1 and October 31 would have lost you money.

The Dow Jones Industrial Index had an average return of only 0.3% during the May to October period from 1950 to 2013, compared with an average gain of 7.5% during the November to April period, although the difference has been less marked in the US during recent years. 

So, in terms of seasonality, November and December has been shown to be a good time to buy equities, particularly smaller companies. This is propitious timing for the three-day Mines and Money London conference, which opens on November 25 with hundreds of mining companies for investors to interrogate.

Go to the profile of Chris Hinde

Chris Hinde

Chief Commentator, Mining Beacon

Previously editorial director of Mining Journal, and more recently head of S&P Global Market Intelligence's metals and mining team, Chris is now Mining Beacon's editor-in-chief and lead commentator. He posts two blogs every week, one on Monday reviewing market conditions over the prior week, and a second on Thursday looking at issues on the global mining scene. There is also a quarterly blog on business opportunities in the sector.

No comments yet.