Stock market hope of a Santa rally at Christmas
INVESTORS are gearing up for the traditional “Santa rally”, which typically sees global stock markets in a buoyant mood in the final weeks of the year, but some fear political uncertainty may ruin the festivities.
The Santa rally has occurred in 25 of the past 30 years, although last December was a rare exception, when the FTSE 100 suffered one of its worst winter performances due to concerns over the US-China trade war and Brexit.
Fidelity International associate director for personal investing Ed Monk said stock market superstitions should be viewed with caution, but the regularity of the annual miracle at Christmas makes it difficult to debunk: “Trading tends to be thinner around the holidays so movements in the headline levels of stock market indices are amplified.”
Seasonal optimism, annual bonus investment and tax planning may also play a role in driving markets higher, while expectations of a Santa rally make it a self-fulfilling prophecy.
Monk said the sleigh ride could still prove bumpy depending on the outcome of US trade talks and the general election on December 12.
Joshua Mahony, senior market analyst at IG, said both stock and currency markets view the prospect of a Jeremy Corbyn-led Labour Government as “an overwhelmingly negative outcome given his antibusiness stance”.
Even a victory for the Conservatives could create uncertainty: “With Boris Johnson persisting with his commitment that he will extend the Brexit transition period beyond 2020, worries are creeping in that a Tory majority could ultimately bring a hard or no-deal Brexit.”