As Christmas approaches, I’m in the mood for a good old seasonal stock market rally. I think there’s a fair chance we’ll get one too.
November has been the fourth-best month for UK shares over the last 50 years, according to new research from Bestinvest, rising 64% of the time. It’s put on a solid show this year too. With one trading day to go, the FTSE 100 is up 1.38%.
February is the third-best month with shares rising 66% of the time but December beats them easily, growing 76% of the time. Only April is better with a figure of 82%.
Be of good cheer
The average December return from UK shares is 1.7% but it can be more. In 2017, shares jumped 5% and by 6.7% in 2021. In 1976, they rocketed 18.9% as investors enjoyed a festive spree. I fancy some of that this year, but let’s be realistic here.
December is the most wonderful month of the year for global markets. This suggests the ‘Santa rally’ is real, although nobody can adequately explain why. Some pin it on hedge funds closing their short positions at the year end. Others put it down to traditional seasonal cheer, and why not? It is Christmas, after all.
Although November has been positive, the FTSE 100 has been trailing in recent days. It’s ending on a flat note. 2023 will not go down as a good one for markets, with London’s blue-chip index down 1.67% overall.
That’s actually worked out well for me. I transferred three legacy workplace pensions into a self-invested personal pension (SIPP) this summer, and was able to carry out the process without feeling I was losing money every second I was out of the market.
All I want for Christmas
I’ve been drip-feeding cash into shares for the last six months, building my positions and reinvesting dividends. Some of my stock picks have put on a solid show, notably private equity fund 3i Group, wealth manager M&G and housebuilder Taylor Wimpey. None have shot the lights out though.
I’m buying with a minimum 10-year view so that’s neither here nor there. Happily, the dividends have already started rolling in (and been instantly reinvested). Now my portfolio selection is almost complete. I’d like to put my feet up and enjoy some seasonal cheer.
Interest rates appear to have peaked but investors are wary. Some are waiting to see whether OPEC+ will cut oil production and what impact that will have on energy prices. Others fear a US recession and further trouble in China. Then there’s Gaza.
Sterling has been strong lately, as Bank of England Governor Andrew Bailey plays down the prospect of base rate cuts. That hasn’t helped the FTSE 100 though, as companies listed on the index generate three-quarters of their earnings overseas, which are now worth less when converted back into pounds.
I don’t know if we will have a Santa rally this year, but I do know this. I’m almost fully invested, because I don’t want to miss a second if we do.
