The Santa rally – a traditional peak in the stock market in December – might not be on the cards this year, as the market opened on Monday at its lowest level this year. The Santa rally has been predicted by investors since 1984, when the FTSE 100 was established, and an annual increase of 2.5% on average nearly every December became noticeable. It’s also an international phenomena, as higher returns are expected in Britain, America, Europe and Hong Kong at this time of year.
These different markets have been given a Santa Score by S&P Dow Jones Indices, as part of “a simple text to measure December’s profitability for investors”. Each market’s average December return is divided by its average annual return, to find out how profitable December has been individually. A Santa Score of above 0.8 is considered above average, with the average across all markets currently being 0.36, suggesting that “December has been…around four times more profitable than the average month across these markets.”
The rankings put the UK in 7th place out of 12, using stats from December 1994 to November this year, with a Santa Score of a below average 0.26. This year, some regions are not set to experience their usual festive boost, however, “in the run up to Christmas we still have inflation and house price data to be released which could give markets a boost.” And Chris Williams, of Wealth Horizon, says that “the rally doesn’t matter” to more long term investors, alongside Laith Khalaf of Hargreaves Lansdown, who has commented on the need for a broader perspective, rather than focusing on individual months.
The financial press are, understandably, full of festive puns on the topic, speculating that we might be experiencing a ‘Scrooge Slump’ instead of a ‘Santa Rally’ this Christmas.