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Will the Santa rally finally happen on the last full trading day before Christmas?

The answer is almost certainly an emphatic ‘no’, but there’s so little in the diary for Friday that I’ve dedicated an entire preview to it

drunk santa
Christmas is a time of year when some companies try to sneak out a profit warning

December is supposed to be the month of the so-called ‘Santa rally’, the seasonal phenomenon during which equity markets rise.

Several reasons for the almost annual rise have been put forward, including workers investing their Christmas bonuses and investors positioning themselves for an expected rise in January (A.K.A the January effect).

Towards the end of the year, fund managers also ‘window dress’ their portfolio, buying all the companies that they should have done earlier in the year to give the illusion that they can indeed pick the right stocks.

Although it may not be fully understood, a couple of analysts reckon the rally has yielded positive returns in 35 of the past 49 holiday seasons, so the chances of it happening are quite high.

Not this year it seems, though. “It’s actually looking rather like a Santa rout right now, with stocks enduring their worst month since 1931,” says Markets.com analyst Neil Wilson.

Friday is the last chance for a London rally to materialise, but the FTSE 100 is off more than 4% so far this month and floundering around two-year lows.

If you’re wondering why I’ve rambled on about a ‘Santa rally’ for so long, it’s because there is next to nothing going on Friday – certainly nothing that’s planned, anyway.

That’s hardly surprising given that Friday is the last full day of trading before Christmas.

It is typically a quiet time of year as people have better things to do, frankly, while most of the fund managers have finished tinkering with their holdings for the year.

That does make it a half-decent time for struggling companies to push out a profit warning, so keep your eyes peeled for a couple of pre-Christmas turkeys.

Friday December 21:

AGMs: Haydale Graphene Industries PLC (LON:HAYD)

Economic data: UK GfK consumer confidence; UK quarterly GDP; UK public sector finances; US durable goods orders; US personal income and spending; US Schiller-Case home price index; University of Michigan final consumer sentiment index

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