Facebook shares open 10% higher at $42 but soon fall back to IPO price
City Index May 30, 2012 4:30 PM
<p>I tweeted some stats at the start of May that took up some interest on the cyclical behaviour of the FTSE 100 over the coming […]</p>
I tweeted some stats at the start of May that took up some interest on the cyclical behaviour of the FTSE 100 over the coming months.
The stats read that of the past 14 years, the FTSE 100 has finished lower between May and the end of August ten times, with average losses of 7.68%.
Looking at May’s performance this time around already, it would appear the saying “sell in May and go away, come back again on Labour Day” remains a strong proposition.
Historical evidence shows that on average, stock markets are typically bearish in this period as investors vacate for the summer months and reduce their equity exposures.
The FTSE 100 is currently down over 7% on the month, marking May 2012 as its worst monthly performance since October 2008, when the markets were at the depths of the financial crisis.
So for now, it would appear that the FTSE 100 looks set to add to the recent historical trend of trading bearishly 11 times out of the last 15 years between the start of May and the end of August.
The question to ask now could indeed be, just how much lower can the FTSE 100 finish this seasonally bearish period?
That said, we cannot discount the fact that there remains key aspects that have the power to lift the markets aggressively.
The prospect that the ECB or Central Banks could inject fresh stimulus into the markets to help lift the gloom and spark a bounce back from these losses – which remains a potential possibility given the rising sovereign bond yields – is still on the table, despite the seeming hostility the European Central Bank has shown to both Spain and broader Europe that it is not their job to bailout banks.
Added to this sentiment is the fact that likely low volumes over the summer – with the Olympic games taking place in London and the Euro 2012 football tournament in Poland and the Ukraine – will mean it may not take much to spike markets one way or another.
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.