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Santa rally cancelled

Equity markets bucked their normally bullish trend in the run-up to Christmas
December 31, 2018

The run-up to Christmas is often seen as a bullish period for stocks. But the so-called ‘Santa rally’ effect – which normally sees shares rise in December – failed to materialise last year, as investors grappled with surprises from the US Federal Reserve, gridlock in Washington, geopolitical fears, and concerns over the outlook for the global economy.

Heading into the festive break, the FTSE 100 finished 5 per cent down, closing at its lowest level in two years. Elsewhere, the S&P 500 shed a whopping 15 per cent of its value, while major indices in Japan, Hong Kong, Shanghai and Europe all lost ground, in contrast with recent years.

In 2017, for example, the UK’s blue-chip index rose 5 per cent in December. In the three previous decades, asset manager Schroders found that the FTSE 100 rose 83.3 per cent of the time in December, and that December was the most likely month to post a gain. The average gain over the period has been more than 2 per cent.