eToro Highlights UK Stocks with Potential for the Christmas Rally
Investors in the UK stock market have significant potential for gains in December. This month accounts for a large portion of annual returns and is known as the 'Christmas rally.' This effect is more pronounced in the UK compared to most major markets outside of Hong Kong. Data from eToro examining the price returns of 14 major global stock indices indicates that December returns average at 1.63%. This figure is considerably higher than the average monthly return of 0.57% from January to November. Consequently, December typically represents 23% of the annual gains observed in these markets.
The FTSE 100 stands out particularly since its inception in 1984. With an average December return of 2.29%, the index outperforms other months by 1.93 points and accounts for 36% of its annual performance. The FTSE 250 is also experiencing a notable Christmas rally, with average December returns of 2.71%, surpassing the monthly average by 2.19 points.
Among global indices, the Hang Seng Index in Hong Kong leads in December performance. Since records began in 1965, the index has shown an average increase of 3.1%, which is 2.15 points above the average monthly return for the rest of the year. This contributes to 23% of the Hang Seng's average annual performance.
Commenting on this trend, eToro Analyst Sam North emphasized the historical significance of December for global stock markets and its potential impact on individual investors. North noted that the reasons behind the seasonal upturn can vary but highlighted that the data underscores the importance of long-term investments to take advantage of performance increases.
The study also indicates that Japan's Nikkei 225 index benefits from the Christmas rally. The index's December gains of 1.98% are 1.59 points higher than the average for the rest of the year, representing 32% of its annual performance.
Not all indices experience the Christmas rally; for instance, Spain's IBEX 35 index tends to perform lower in December compared to other months. However, Australia's ASX 200's December performance of 1.36% demonstrates that the Christmas rally is a global phenomenon that extends beyond the Northern Hemisphere.
North concluded by highlighting the regional differences in the effects of the Christmas rally, stating that investors should consider local market dynamics to optimize their investment strategies during the holiday season.