Statistics analysed by AJ Bell suggest December is historically the best performing month of the year and chances of a seasonal rally in the FTSE 100 are high.
A Santa Rally is always referred to by commentators as we move towards the end of the year, and for good reason. Since the FTSE 100 was established in 1984, the index has returned over 2% on average in December.
Indeed, the majority of December trading periods since 1984 have produced positive returns.
“If you want to know why markets talk about the Santa Rally, that’s why – because the numbers back it up. Thursday got the month off to a slow start but investors can be forgiven for hoping for a little seasonal cheer after the FTSE 100 has spent all year huffing and puffing to a rise of around 2% (albeit with dividends and in some cases buybacks on top),” said Russ Mould, AJ Bell investment director.
AJ Bell analysts compiled data on the best performing Decembers and compared to the following year’s performance. There have been very few negative Decembers since the FTSE 100’s inception in 1984 and all but one negative December was followed by a positive return in the following year.
FTSE 100 | FTSE 100 | |
| Year | Performance in December (ranked) | Performance in following calendar year |
| 1987 | 8.4% | 4.7% |
| 1993 | 7.9% | (10.3%) |
| 2010 | 6.7% | (5.6%) |
| 1989 | 6.4% | (11.5%) |
| 1997 | 6.3% | 14.5% |
| 2016 | 5.3% | 7.6% |
| 1999 | 5.0% | (10.2%) |
| 2017 | 4.9% | (12.5%) |
| 2021 | 4.6% | 2.6% |
| 1984 | 4.3% | 14.6% |
| 2009 | 4.3% | 9.0% |
| 2005 | 3.6% | 10.7% |
| 2008 | 3.4% | 22.1% |
| 2020 | 3.1% | 14.3% |
| 2003 | 3.1% | 7.5% |
| 1991 | 3.0% | 14.2% |
| 2006 | 2.8% | 3.8% |
| 2019 | 2.7% | (16.9%) |
| 1986 | 2.6% | 2.0% |
| 1992 | 2.4% | 20.1% |
| 1998 | 2.4% | 17.8% |
| 2004 | 2.4% | 16.7% |
| 1996 | 1.5% | 24.7% |
| 2013 | 1.5% | (2.7%) |
| 2000 | 1.3% | (16.2%) |
| 2011 | 1.2% | 5.8% |
| 1995 | 0.7% | 11.6% |
| 2012 | 0.5% | 14.4% |
| 2007 | 0.4% | (31.3%) |
| 2001 | 0.3% | (24.5%) |
| 1988 | 0.0% | 35.1% |
| 1990 | (0.3%) | 16.3% |
| 1994 | (0.5%) | 20.3% |
| 2015 | (1.8%) | 14.4% |
| 1985 | (1.8%) | 18.9% |
| 2014 | (2.3%) | (4.9%) |
| 2018 | (3.6%) | 12.1% |
| 2002 | (5.5%) | 13.6% |
Although a negative December is usually followed by a positive year, there is no real indiction of what will happen in the next year based on December’s performance.
“The Santa Rally is not certain to offer anything more than festive cheer because it does not seem to be a reliable indicator for the following year,” Russ Mould said.