Followers of stock market anomalies will know that this is the time of year when the fabled Santa Rally is due to get under way. The good news for UK investors of course, is that a favorably-timed general election (paired with an outcome the market liked) has got things off to a solid start...
If you want someone to blame for the annual blizzard of Santa Rally headlines, look no further than Yale Hirsch, the founder of the Stock Trader’s Almanac. His research back in the 1970s sparked an enduring myth that markets tend to rise through the second half of December and into the new year.
A quick look at recent history suggests this doesn’t always happen (last year the market slumped in December only to recover in January). But that hasn’t entirely tainted enthusiasm for these kinds of seasonal events - although some scepticism is perhaps healthy… (which Miserly Investor (@miserlyinvestor) is always good at):
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In fact, the Santa Rally is just one of several calendar effects that have turned heads over the years. Others include the Halloween effect, the January effect, the turn-of-the-month effect, the holiday effect and even the weekend effect.
If you’re feeling a bit incredulous about all these ‘effects’, you’d half-way right. Research a few years back by Laurens Swinkels and Pim van Vliet at the Dutch quant investment firm Robeco, analysed them and came up with a couple of conclusions.
First was that the January effect, the weekend effect and the holiday effect don’t stand up to scrutiny. The return performance was nothing special and they only worked when they coincided with other, more influential calendar events. Second, and more promising, was that the Halloween effect and the turn-of-the-month effect do indeed tend to see outsize returns. Why would that be? It’s not exactly clear.
What happened in 2019?
Regardless of whether the Santa Rally continues to gain ground, here we’re indulging in a quick look at some of the biggest stock market winners of 2019.
In many cases, the outcome of the general election has had a big, last minute influence. For now, a Conservative majority, and the relative certainty that brings, has lifted sterling and inspired confidence in UK-centric companies. Cyclicals, financials and industrials exposed to UK consumers and potential increases in construction and infrastructure…
