Will St. Nick give investors the ‘Santa Rally’ gift of record consecutive monthly gains in 2017?

29 November 2017
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Investors in the S&P 500 – the index of leading US companies – are days away from another record month of gains, and some might be wondering if 2017 will set a record for consecutive monthly returns.

The major US stock market index has posted 12 months of consecutive positive monthly returns – the longest unbroken run of consistent gains across 90 years of data, according to wealth management firm Tilney.

But will the supposed ‘Santa Rally’, where stock markets typically receive a boost over the festive period, take place this year?

According to wealth management firm Tilney, December has seen the S&P 500 give investors positive returns an impressive 83% of the time in the past 30 years.

When it comes to the FTSE 100 index of the UK’s biggest firms, December has posted a positive return in 87% of the last 30 Decembers.

In the past three decades, the only years in which the FTSE 100 posted negative returns were 1994, 2002, 2014, and 2015. Of these, only 2002 saw monthly losses of greater than 5%, thanks principally to the ongoing effects of the burst of the dotcom bubble.

‘The Santa Rally is a very convincing phenomenon’

Jason Hollands, managing director at Tilney Group, comments on the current buoyancy of the markets: “Statistically speaking, the Santa Rally is a very convincing phenomenon although the reasons why the markets have a tendency to end the year on a high are a source of much debate. Optimism about end of year bonuses and general Christmas cheer driving markets higher seem a little tenuous, with more technical theories suggesting that momentum in the markets may be down to fund managers “window dressing” their portfolios with stocks that have performed well and reducing cash weightings ahead of reporting periods to clients.

 “In truth though, it is nigh impossible to predict short-term market setbacks and it is better for investors to stay focused on their long-term objectives. While US shares do look expensive compared to historical trend, a large part of this is down to sharp rises in technology company shares which now collectively account for around 23% of the S&P 500 Index.

“In contrast, UK equities appear fair value and continue to offer attractive dividend yields, the outlook for European companies is positive with strong earnings momentum and for value hunters Global Emerging Market shares are still trading well below longer term trend despite a strong year of share price returns.”

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