Market Commentary December 2018

Bulls are an ebullient bunch. Despite the stock market antics of the last few months, they have already moved on to the potential for a December rally. And they have history on their side. For the stock market tends to follow a predictable pattern in December. The first two weeks are characterised by a flat or even falling market. This is accompanied by investor pleas of “Where’s Santa?” and “Is the Santa Rally no more?” Then, from the 10th business day (14th of December this year), the market rallies to make December the FTSE 100’s best performing month of the year, rising 2% on average, 78% of the time. There is no definitive explanation for this Santa effect, but various causes have been suggested. These include fund managers window dressing their portfolios and positive sentiment in the market caused by the festive season accompanied by low trading volumes.