- The ‘Santa Rally’ occurs 85.3% of the time, making it one of the most reliable statistical market trends
- Since 1984 the UK’s leading share index has increased by an average of 2.4% during the month of December, excluding dividends
- It has only fallen five times during December in 34 years, including 2014, 2015 and 2018
- The last two weeks of the year are statistically the strongest, starting from the 10th trading day of December
Financial markets have many sayings and trends. Investors are always looking for patterns in the data to gain a competitive advantage and boost their investment returns. Most, however, don’t hold up to scrutiny.
One of the few exceptions to this rule, however, is the so-called ‘Santa Rally’, which has long been regarded as one of the more statistically robust market trends. The Santa Rally itself relates specifically to the last two weeks of the year, starting on average on the 10th trading day of December.
History shows that the stock market tends to be flat in the first couple of weeks before rising strongly in the last two weeks, according to Adrian Lowcock, head of personal investing at investment platform Willis Owen.
“The so-called Santa Rally is one of the more repeatable trends in stock market lore. Partly down to lower trading volumes (meaning shares can move more meaningfully) and potentially also because of repositioning and a more positive thanks to the festive season, the trend is well established over the last four decades.
Since the UK’s leading share index was created in 1984, the Santa Rally has occurred 85.3% of the time, with the index only falling in December 2014, 2015 and 2018.
“This year, however, the situation is unique,” said Lowcock. “With millions of people still in some sort of lockdown and social interaction limited, and with Brexit still unresolved, the end of 2020 may go more quietly for investors.
“Any further news on vaccines for COVID-19, such as approvals in Europe and the US, could act to support further rallies in stock markets.”
However, the real trigger for the Santa Rally could be a Brexit deal, with the UK currently locked in last-minute negotiations with the EU.
“This week could see the trigger for a rally for UK shares if we get a Brexit deal,” Lowcock said.
“Valuations have lagged other developed markets – such as the US – thanks in particular to Brexit, creating attractive valuations versus other markets, and a resolution to that in the form of some deal could ignite the traditional Santa Rally for the UK.”
Adrian Lowcock, Chris Tuite
Head of personal investing Director & Head of Consumer Finance
Willis Owen MRM London
07849 846387 020 3326 9925
Notes to Editors
Willis Owen is one of the UK’s leading online investment service providers. Founded more than 20 years ago Willis Owen now has around £1bn of funds under management and has acted as an intermediary for over 150,000 customers and hundreds of millions of pounds worth of investments,
Willis Owen Limited is authorised and regulated by the Financial Conduct Authority.