‘Tis the Season…?

According to Google, the top search results for “Santa hats for….” are dogs, chairs, wine bottles and cats. When you see a trend of people buying Santa hats for their furniture, you know that Christmas fever is well and truly upon us. It’s been a creeping craze for some months: here in Edinburgh, we spotted a Christmas tree twinkling back in September.

At this time of year, we often see articles about reining in spending and curbing the temptation to get carried away. People tend to make emotional decisions at Christmas – spending more than they should, perhaps driven by the fear of missing out.

Investment managers and stockpickers (being human) are not immune to this behaviour. In fact, it has contributed to a festive phenomenon – the Santa Claus Rally. This is a market surge that typically lasts for several days in late December and sometimes morphs into a new year rally.

In the past, both technical and emotional drivers have driven Christmas rallies. The Harriman Stock Market Almanac cites “fund managers window dressing their portfolios, positive sentiment in the market caused by the festive season which is accentuated by low trading volumes, anticipation of the January effect and tax reasons”. People investing Christmas bonuses and the feeling of optimism for the year ahead are also thought to fuel the phenomenon.

We can’t say if the Santa Claus Rally will materialise this year. As things stand, there are a few issues preoccupying investors. These include Brexit, US trade with China, slowing economic growth and concerns for an inverting yield curve – historically the harbinger of a recession.

Whatever the time of year, our aim is to remain dispassionate and avoid emotional decision making. So instead of participating in the hype of the Santa Claus Rally, we’ll be focusing on the long-term. And our office chairs will remain free of Santa hats…

Please remember that past performance may not be repeated and is not a guide for future performance. The value of shares and the income from them can go down as well as up as a result of market and currency fluctuations. You may not get back the amount you invest.

Please note that SIT Savings Ltd is not authorised to provide advice to individual investors and nothing in this blog should be considered to be or relied upon as constituting investment advice. If you are unsure about the suitability of an investment, you should contact your financial advisor.