The FTSE 100 delivered a positive return in 26 out of the last 30 Decembers
If you believe in the Santa rally, now could be a good time to top up your pensions or any stocks and shares Isas or is it just another children’s story?
The Santa rally is more than just a myth, with the FTSE 100 delivering a positive return in 26 out of the last 30 Decembers, a “staggering” 87 per cent success rate, according to wealth manager Tilney.
Even when the index did drop, in 1994, 2002, 2014 and 2015, the slippage was minor.
In contrast, it has risen by more than 5 per cent on seven separate occasions, including a leap of 8.24 per cent in December 1993.
The S&P 500 index also celebrated large success in December in 25 of the last 30 years
If December goes well, every single month this year will have been positive for investors
Santa also delivers in the US, where the benchmark S&P 500 index of top firms has celebrated a fun-packed December in 25 of the last 30 years.
Jason Hollands, managing director at Tilney, says the statistics are convincing, but the reasons are uncertain: “Some pin it on City optimism about end-of-year bonuses and general Christmas cheer, but this seems a little tenuous.”
Others say that fund managers shift money from cash into top performing shares ahead of reporting their calendar year results to clients.
“Another factor could be hedge funds closing down short positions that have not played out as expected, forcing them to buy back those shares,” he adds.
The S&P 500 posted a record-breaking streak of 13 consecutive monthly gains in November
Hollands says a Santa rally would wrap up a glittering 12 months: “2017 is shaping up to be an incredible year of double-digit returns across most global stock markets.”
In November, the S&P 500 posted a record-breaking streak of 13 consecutive monthly gains, the longest unbroken run in 90 years.
“If December goes well, every single month this year will have been positive for investors,” he adds.
There could still be an upset if, say, tensions increase with North Korea, or President Donald Trump disappoints markets by failing to force through significant tax cuts.
Hollands says US stocks look expensive, but the UK remains fair value with attractive dividend yields, while both European and global emerging markets may still…