Will the FTSE fall by £10bn on Monday after daylight saving time ends?

Experts have found that the move from summer to winter time is associated with a drop in stock markets - Southern Lightscapes-Australia

The dazy confusion on the morning after the clocks go back may not just affect your sleep pattern but hit your wallet too. Experts have found that on the Monday after a time shift, stock markets fall to below average levels. The dip is typically much sharper in autumn than spring.

So, as daylight saving time (DST) draws to an end, we take a look at what the move means for your money.

Bringing in the fall

In America alone, the move from DST led to an average one-day loss of $31bn (£23.9bn) on the stock exchanges over a 30-year period, according to a research study called “Losing Sleep at the Market: The Daylight-Savings Anomaly”.

The Monday DST hangover theory has also been seen in Germany, Canada and Great Britain. Stock broker AJ Bell found that in eight of the past 10 years the FTSE All Share index, a broad measure of the London stock market, has fallen the day after the clocks go back in October.

The average slide in value was around 0.4pc, which at current prices would wipe £9.9bn off London markets on Monday.

Longer studies put the average drop higher, at over 1pc.

What causes the drop?

Even minor changes to our sleep patterns can severely impact our judgment, anxiety levels, reaction times and problem solving abilities, according to the authors of “Losing Sleep at the Market”.

The report highlighted the fact that investment fund managers generally get below average levels of sleep, sometimes no more than two hours per night. It compared the deprivation and imbalance caused by changes to sleep patterns to the tactics used by military investigators.

With the people managing your money so sleep deprived that minor shifts in their routine throw them off kilter, daylight savings time could be knocking financial markets out of balance.

So what should investors do?

Laura Suter of AJ Bell said that although some studies appear to show that the clocks changing has an impact on markets, investors shouldn’t use this as a strategy for their portfolio.

“It’s like adages such as ‘sell in May and go away’ or that certain days of the week tend to have positive returns – interesting to read about but not a basis for investing your portfolio,” she said.

“There are lots of factors that affect markets each day, and it’s nigh on impossible to rule the impact of all of them out and isolate just one effect.”