Why the FTSE 100 may (or may not) rally in December

The term ‘Santa Rally’ is used by investors to describe the often-seen rise in the price of equities as we approach the end of the year.

There’s no overwhelmingly obvious reason as to why this happens but — as Stephen Eckett details in Harriman’s Stock Market Almanac — explanations have varied from “fund managers window dressing their portfolios, positive sentiment in the market caused by the festive season which is accentuated by low trading volumes, anticipation of the January Effect and tax reasons” (the January Effect is the tendency for stocks to do rather well in the first month of the year).