It’s that time of year again, when we refresh our statistics and take another look at the year-end phenomenon known as the Santa rally. The bullish theory holds that equities tend to rally in December, fuelled by a combination of window-dressing by portfolio managers, holiday-thinned trading volumes and self-fulfilling prophecy.

Our latest report looks at historical data since the UK 100 ’s 1984 inception and analyses average December gains for current UK Index members (index members change on a quarterly basis but we look only at current members). We also cover sectors and major global equity indices.

To kick things off, the statistics show the UK’s blue-chip UK 100 has one of the best December hit rates among major equity indices, up an impressive 27 out of 34 years (79%), for an average 2.4% gain (this would be 28.8% annualised).

Drilling into the numbers, almost half of UK 100 members show average December gains of 3%+; 22 companies 4%+, 12 stocks 5%+, 6 names 6%+). In fact, inverting the data, only 10 UK Index names show anything less than an average breakeven in December while fewer than 20 can claim anything less than an average 1% gain. So the Santa rally statistics are very favourable from a seasonal standpoint.

Looking at it another way (number of years of positive December performance) almost 50 UK Index members show 15 up years from the 24 available (63% hit rate); 40 have a 67% hit rate (16 years), 18 have a 71% success rate (17 years). 10 have a 75% hit rate which is better than the UK Index itself (18 years), 5 are nudging 80% (19 years +) and one boasts almost 90% positive Decembers out of 24 (21 years).

I’m sure you’re itching to know which Santa Rally names are up an average 6% in December and which boasts 21 up years. It’d be harsh of me to leave you hanging. So I’ll divulge that the best hit rates (70-90%) go to – in no particular order – a building materials company followed by an advertising giant and several names from the property space.

As a sign of my unending generosity I’ll also unveil that the best average December gains (5-11%) go to – again, in no particular order – a brace of Travel companies, a handful of housebuilders, a gambling group, the same aforementioned building materials company and some IT/Tech stocks.

This year, bearing in mind the recent market correction, rather than simply pick from those with a good hit rate and average performance, our top picks have a twist. We’ve included an extra layer of analysis, considering those with poor year-to date performance, hoping to identify laggards which may benefit from an end-of-year bargain hunting rally. Who? Another gambling group, the same advertiser, a telecom giant, another housebuilder and a well-known DIY house.

To avoid frustrating you any longer here is a link to the report allowing you to evaluate our top Santa Rally picks and crunch the numbers yourself, to decide which names might fare best in December. Enjoy.

Mike van Dulken, Head of Research, 23 Nov 2018