December, beyond the festive glow, is also a key month for the markets. The final weeks of each year are filled with hopes, strategic moves, and expectations for the famous “Christmas rally”. Yes, the well-known Santa Rally.
But what exactly is this Santa Rally that everyone eagerly awaits? And more importantly, is there a chance we will see it this year?
WHAT IS THE SANTA RALLY
Let’s begin with the basics. The Santa Rally is a historically observed phenomenon in which markets record gains during the last days of December and the first days of January.
Where does this come from? It is mainly linked to investor optimism, the positive holiday mood, the low trading volume, and year-end portfolio rebalancing.
Just consider this: the FTSE 100 posted a positive return in December in 24 of the last 30 years, according to Fidelity. Meanwhile, the S&P 500 finished December in the green more than 73 percent of the time over the past 75 years.
In short, if there is one month when gains tend to appear, it is December. Of course, as always in investing, nothing is guaranteed.