It looks like the stock market won’t be treating us to a Santa Rally this year. That’s a shame, but it isn’t the end of the world.
The notion that share prices fly in the final month of the year is a little fanciful, but the statistics back it up. The FTSE 100 has climbed 72% of the time in December over the last 40 years, according to Nutmeg. Its average monthly return is an impressive 2.5%.
Typically, the excitement grows in the final week before Christmas but this year we’re seeing a Santa slump instead. The blue-chip index is down 2.89% in the last five trading days.
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The FTSE 100’s down but I don’t mind
Sadly, this leaves it up just 4.39% year-to-date. Throw in the average yield of 3.58%, and the total return is just shy of 8%. That’s better than cash, but in the short term it’s a disappointment. As ever when investing, it’s the long term that matters.
I don’t buy FTSE trackers, so index performance doesn’t directly reflect how well I’ve done. I buy individual shares, and some have gone great guns. Insurer Just Group‘s up 90% year-to-date. Engineer Costain Group‘s up 68%. Private equity specialist 3i Group chipped in with 50%.
Inevitably, I’ve got my share of losers too. My punt on grocery logistics specialist Ocado Group backfired. It’s down 60% this year. Miner Glencore‘s down 25%, pharmaceutical stock GSK‘s (LSE: GSK) dipped 10%.
Yet I’m not too worried. While the Ocado share price could go anywhere, I’d expect Glencore and GSK to do better in 2025.
I’m backing GSK to bounce back
The FTSE 100 pharmaceutical giant’s struggles took me by surprise. I saw GSK as a solid defensive portfolio holding for volatile times, but it’s had a rough ride.
First, it was hit by a huge US class action claim over withdrawn cancer treatment Zantac. That was largely settled at the cost of £2.2bn in October, but in November, Donald Trump won power and investors started fretting over his plans to target big pharma.
Yet I’m sorely tempted to top up my stake. The GSK share price looks great value with a price-to-earnings ratio of just 8.52. The dividend yield has crept up to 4.41%. Maybe Trump won’t be as tough on big pharma as he says. We’ll see.
The only thing holding me back is that after the recent dip I can see a whole heap of FTSE 100 stocks I’d love to buy. Cash is tight at Christmas but I’m desperate to go on spree.
I’d cheerfully double my stake in sportswear specialist JD Sports, which is dirt cheap with a P/E of just eight times earnings. Oil giant BP‘s even cheaper at just 5.4 times, while yielding 6%. I’d buy more of that too.
HSBC Holdings trades at 8.3 times, while yielding 6.37%. I don’t hold the Asia-focused bank and would love to put that right.
Everywhere I look, I see bargains. Forget the Santa Rally, this is much more exciting. The Sales are on and I’m ready to buy.
