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In charts: the 83pc chance that the 'Santa Rally' is real

Cover of The Harriman Stock Market Almanac 2018 by Stephen Eckett There is an 83pc chance that the “Santa Rally” - when share prices supposedly surge in the run-up to Christmas - is real, according to new data.
Since 1987, the FTSE 100 has risen by an average of 2.4pc in December, compared to a 1pc fall on average in June - the worst month for the index historically.
Overall, the FTSE 100 has risen 83.3pc of the time in December. The next best month is October, when the market has risen 74.2pc of the time.
The analysis, conducted by investment firm Schroders, found that June, September and November were the only months when the market rose less than 50pc of the time over the 30 year period examined.
There has been much speculation about the existence and cause of unusual market phenomena such as the Santa Rally.
According to the Stock Market Almanac, in 2014 and 2015 the FTSE 100 fell significantly in the first 10 trading days of December, before a market rally lasting around 10 days.
In these two years, the index rallied by just over 6pc, although it remained lower than it had been before the fall at the start of the month.
Data from the Almanac, which is written by market historian Stephen Eckett and updated each year, says previous years' returns suggest the rally commences on December 14. This year that falls on Thursday.
In 2016, December fell in the middle of a year long rise in the FTSE 100, which began following the Brexit vote, as the falling pound boosted the value of overseas earnings - which make up 70pc of FTSE 100 earnings.
James Rainbow, of Schroders, said: “One theory is based around investor psychology. There is, perhaps, more good will cheers in the markets during holiday season putting investors in a positive mood, which drives more buying than selling.
“Another view is that fund managers, who account for a substantial proportion of share ownership, are re-balancing portfolios ahead of the year-end.”
He added that such superstitions were “true until they fail to be”.
“Just because the Santa Rally has happened before, doesn’t mean the pattern will be repeated,” he said.


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