This month could be an important time for the FTSE 100. As Christmas trees go up and festive light displays get switched on, a number of macroeconomic factors seem to be swinging in the right direction for London’s leading index. Throw in the promise of one of those fabled ‘Santa rallies’ and we might just have a yuletide to remember.
Let’s look at the reasons why December could be the start of a long bull run for the FTSE 100. And how all of it could begin with a rip-roaring run up all the way to Twelfth Night. After all, ’tis the season!
Festive cheer
Let’s start with the Santa rally. The phenomenon where stock markets rise in December, especially in the days around Christmas, is anathema to efficient markets purists – yet we see it time and again. Some put it down to general cheer among investors, some to the consumption of a few too many festive tipples.
Whichever way you slice it, the FTSE 100 has risen in most Decembers this century with a few 6% and 7% months thrown in there! If the markets get a happy visit from Father Christmas then I’d say 2026 could just begin with the FTSE 100 at five digits.
Sidenote: with September and October being the historical worst months for stock markets, the pre-festive period is arguably the best time to find bargain stocks. But that doesn’t mean there are no good stocks on offer now. We may just need to look at them slightly differently.
There’s the promise of an interest rates cut when the Bank of England meets on 18 December. The markets have priced it in at an 86% chance. Cheaper borrowing means more investment and more economic growth – good stuff for Footsie companies.
And now the Autumn Budget is out of the way with no scary surprises, we might be in for that thing companies crave – stability. While there are no definites, it’s hard to see the government coming back for another big tax-raising budget this term. That’s over three years businesses could plan for without unexpected shocks.
Stockings
So, one stock I think is worth keeping an eye on over the next month is Tesco (LSE: TSCO). Christmas is a busy period for the nation’s biggest shop. It could cap off a terrific year for the share price too.
One of the reasons I invest in it myself is because of the user experience. This is along the lines of the ‘buy what you know’ advice on stock investing. Tesco’s stores are warm, pleasant and impeccably clean. It’s online portal is the best one I’ve used of any of the nation’s shopping sites. I think it’s better than Amazon.
Perhaps this is one reason why the firm keeps taking market share. In arguably the UK’s most competitive sector, and already number one position, Tesco keep growing its market share. It’s risen from 27.1% to 28.2% of UK supermarket sales in the last two years. Although the rise of budget shops like Lidl and Aldi pose a threat here too. Both of those German supermarket chains have been growing market share too.
There’ll be plenty of Tesco’s mince pies and eggnog served on dinner tables on 25 December. I’d say the shares could be worth considering for an investor’s Christmas stocking too.
