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The Accumulator: Santa rally still on the cards

December is traditionally the best month for markets and a strong week could be setting the FTSE 100 up for another 'Santa rally'.

 
The Accumulator: Santa rally still on the cards
 

After a shaky start to the month, a 'Santa rally' could still be on the cards for markets after a week that will have restored cheer to investors, as our exclusive Accumulator data table shows.

December is traditionally the best month for the FTSE 100, and history seems to suggest there is something to the idea of a 'Santa' rally.

Investment groups Schroders and Tilney have put some numbers on the trend. After looking through data for the last 20 years, Schroders found that the FTSE 100 rose 83% of the time. 

Across the pond, the same trend appears to hold, with the S&P 500 having risen for 83% of the time in December over the last 30 years, according to Tilney.

There are a number of theories behind the trend. James Rainbow at Schroders pointed to investor psychology. 'There is, perhaps, more goodwill cheer in the markets due to the holiday season putting investors in a positive mood, which drives more buying than selling,' he said.

Tilney managing director Jason Hollands said portfolio positioning was a more likely explanation for the trend, with fund managers "window dressing" their portfolios with stocks that had performed well ahead of reporting periods.

'Another factor could be hedge funds closing down short positions that have not played out as expected, forcing them to buy back shares and return them to the institutions who lent the shares to them,' he said.

To access the Accumulator table, click here.

3 comments so far. Why not have your say?

Micawber

Dec 15, 2017 at 17:14

Somehow I feel that Santa has run out of puff at the top of the hill, but let's hope..... Asset managers' resolutions for the New Year are more likely to involve trimming off the fat, methinks.

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Stephen Hibbin

Dec 16, 2017 at 14:32

My sentiments exactly Micawber.

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Stephen B.

Dec 17, 2017 at 17:34

I think it's partly that it's in everyone's interest for markets to be quiet at a time when most people will be away from their desks, so no one wants to rock the boat. Of course that doesn't prevent a crisis caused by external events, but even there most countries have year-end holidays of some kind so political events are a lot less likely too.

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