Strong FTSE fourth quarter gives investors seasonal cheer

Investors should look to Q4 for the best stock market returns of the year, according to research by stocks and shares website ADVFN.

ADVFN data highlights that the FTSE 100 rises an average of 4.2% between the first trading day of October and the last trading day of the year; making it the strongest period for the UK’s main index. The first quarter of the year is the second strongest performer, experiencing an average rise of 3.44%, whilst Q3 is the only period that sees a negative return, with the FTSE declining an average of 0.26%. The second quarter of the year sees an average rise of 1.14%.

The dot com boom years of 1998 and 1999 saw particularly strong fourth quarters, with the FTSE 100 rising 19.85% and 16.07% respectively. However, Black Monday was responsible for the UK’s main index dropping 27.8% between October 1st and the last trading day in 1987: a point drop of 661.1. Despite October’s crash-laden history, it is in fact Q3’s September that is the worst month of the year showing negative returns 14 times out of the last 23.

The so-called ‘Santa Effect’ continues to buoy the UK’s main index and the fourth quarter as 21 out of the last 23 Decembers have seen a rise.

“October and November are probably the ‘hardest working’ months of the year in business terms, with no protracted summer holidays – the downfall of Q3 - no spring breaks and no New Year’s hangover to contend with. Even the distraction of Christmas doesn’t hamper the quarter’s performance as this period is traditionally a strong time for the markets as retail sales climb and the general bonhomie takes over,” said Clem Chambers, CEO of ADVFN.