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League table: which stock market has the strongest ‘Santa rally’?

by International Commercial Investment on December 3, 2014

Source: The Telegraph

Investors have come to expect the stock market to rise every December. New research shows that the ‘Santa rally’ is no myth – and reveals the country where it is biggest.

The “Santa rally” – a good run for stock markets in the run-up to Christmas – sounds like an investment myth. But it is alive and well, an authoritative analysis of the data across the world’s major developed markets has established.

Every one of these markets – including Britain, America, Europe and Hong Kong – has tended to produce better returns in December than in the other months of the year, according to S&P Dow Jones Indices, the company behind the benchmark S&P 500 index of American shares.

The firm said it had designed “a simple test to measure December’s profitability for investors”. Each market was given a “Santa Score” by dividing its average return each December by the average annual return. Since there are 12 months in the year, a Santa Score of one 12th (about 0.08) would be expected in the absence of any seasonal effect.

In other words, a Santa Score above 0.08 indicates that December is typically a better month for the stock market than the average month.

In fact the average Santa Score is 0.36, the research found, meaning that “December has been, on average, around four times more profitable than the average month across these markets”.

Japan had the highest Santa Score, 1.13, followed by Italy on 0.51 and Germany on 0.34. Britain’s stock market had a score of 0.26 – still well above the 0.08 that would indicate that the Santa rally was a myth.

A Santa Score above 1, as was found in Japan, implies that investing only in December and avoiding shares for the rest of the year is “a market-beating strategy”, S&P Indices said.

International Commercial InvestmentLeague table: which stock market has the strongest ‘Santa rally’?

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