16 December 2020
As many readers will know, the market is normally very strong in December with the month being the second best performing month of the year after April. In fact, the ten trading days leading up to Christmas have seen the FTSE 100 Index rise in 24 out of the last 30 years! There is no real logic to this – cynics suggest that the move is due to fund managers buying shares to boost the Index and thus the value of the investments in their portfolios – which then results in higher management fees for them! Trading in the last few days before Christmas can also be relatively thin, exacerbating share price movements. And, it does not happen every year. Last year though saw the FTSE 100 rise from 7,213.76 to 7,632.24 between 10 December and 24 December, an increase of 5.8%. This period obviously included Boris’ victory in the General Election. On 10 December 2020, the FTSE 100 closed ta 6,599.76. A similar increase of 5.8% would take it to almost 7,000, or 6,982.55 if you want to be exact!
However, November 2020 saw the FTSE 100 produce its largest monthly rise in over 30 years and so maybe the best has already been seen. Clearly, ongoing Brexit negotiations will have an impact as and when any resolution is reached, .and what may be seen as a successful conclusion for the UK could spur such a rally. On the other hand, the continued negative impact of Covid-19 and the accompanying lockdown will encourage a more cautious approach, especially if a more severe lockdown looks likely for 2021.
On balance though, we believe that Santa may well come calling this year and although a target for the FTSE 100 of 7,000 may be too ambitious for close of play on Christmas Eve, we expect the Index to end the period on a strong note.