After a volatile week for global markets, is there still time for a Santa Rally?
Adrian Lowcock, head of investing at Axa Wealth, says Yes.
The so-called Santa Rally relates primarily to the last two weeks of the calendar year – the weeks of Christmas and New Year. In this two-week period, the FTSE 100 has put in its best performance of the year every year since 1986.
A major reason for this is that many investors have gone on holiday for the Christmas break: transaction volumes on the London Stock Exchange are low, which means that even a relatively small transaction can have a significant impact on markets.
The recent fall of the oil price and subsequent volatility of the rouble suggest that stock markets are focused on the bad news, and are going only one way.
But a stabilisation of the oil price and action from Russia could quickly change sentiment for global markets – if not for the Russian stock market itself.
And given that the UK market has been sold heavily in recent weeks and months, this creates a solid base from which a last-minute Santa Rally could appear.
Rebecca O’Keeffe, head of investment at Interactive Investor, says No.
Global markets continue to struggle against a backdrop of collapsing oil prices, slowing Chinese growth and the Eurozone’s woes.
Lower oil prices should, in theory, be a significant boost to oil-consuming countries, but the benefit is being overwhelmed by increasing financial risks, as oil producers face a growing risk of default.
Additional fears over global growth and looming higher interest rates are also adding to investors’ concerns. Add to this the possibility that Europe’s crisis could flare-up yet again, and you have a combination of factors that are spooking investors.
Increased volatility often creates significant opportunities for traders, so some are buying in at current prices in the hope that the significant falls we’ve seen over the past few days and weeks have created a good buying level.
But with mounting risks still a major concern, many remain reluctant to invest. The time for a Santa Rally is rapidly running out.