Chart of the month: The Santa rally
- 21 January 2020
- 5 minutes
The Santa rally
There is a phrase in investing called the Santa Rally. Perceived wisdom states share prices rise over the last weeks of December into the New Year. There are several theories about why this happens from increased optimism fueled by the holiday spirit, to institutional investors trading their clients’ portfolios before going on holiday .
The chart below shows how the FTSE All Share Index has performed over the past five years. The green shaded areas indicate a so-called Santa rally where stocks have indeed risen over the last three weeks of December and into January.
But in December 2018, stocks actually fell, hence that area is shaded in red. This calls into doubt whether the Santa rally is real. We believe a better strategy is to maintain a long-term focus and not be tempted by the supposed promise of short-term trends.
Forecasts of future performance are not a reliable guide to actual results in the future; neither is past performance a reliable indicator of future results. The value of investments, and the income from them, may fall as well as rise and cannot be guaranteed and the investor might not get back their initial investment,
Any views expressed are our in-house views as at the time of publishing.
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