CHRISTMAS MIRACLE: Some investors will be awaiting the arrival of the Santa Claus rally but is it really real?
CHRISTMAS MIRACLE: Some investors will be awaiting the arrival of the Santa Claus rally but is it really real?

Santa Claus rally just wishful Christmas thinking?

CHRISTMAS is full of traditions, and investors will be eagerly awaiting the arrival of the Santa Claus rally - the uptick in shares often seen in the final trading of the year.

Is it a coincidence or is the Santa Claus rally real?

There is a valid argument that share values are likely to rise in December. People may have end-of-year bonuses to invest, or perhaps the seasonal good cheer just makes us more optimistic.

Last year, the Aussie sharemarket, as measured by the ASX 200 index, actually gained very little overall from the start of December to the new ear. But amid the daily ups and downs, the ASX 200 did rise 2.7 per cent between Christmas Eve and New Year's Eve - enough to convince the true believers that the Santa Claus rally is genuine.

The year before, in 2017, the market rose 1 per cent in December. And in the previous year, investors saw shares steadily rise by about 4 per cent through December 2016.

That's not to say Santa Claus always visits the market in December. In 2011, for instance, the Grinch stepped in, and equity values fell 4 per cent ahead of the new year.

While it's all a bit of lighthearted festive fun, I personally won't be holding out for the Santa Claus rally. The ASX 200 has already climbed from 5646 at the start of the year to 6862 in early December, giving sharemarket investors a nice 17 per cent return for 2019.

The new year looks promising too. We're likely to see more of the same in terms of very low interest rates. The property market recovery is gaining traction, having notched up five consecutive months of rising values nationally. Moreover, the boost to personal wealth from rising home equity could generate an increase in household spending, which is also a plus.

The upshot is that I'll be sticking with my long-term, mainly growth strategy in 2020, but if Santa wants to pay a pre-Christmas visit he's always welcome.


Paul Clitheroe is chairman of InvestSMART, chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.