Investment Insights - Hot Topics December
Welcome to Balance: Wealth Planning's Hot Topics!
Welcome to Balance: Wealth Planning's December edition of hot topics - Christmas special!
Every month, our financial planners collate the latest 'hot topics' within the profession, to update you regularly as they occur and cover any frequently asked questions you have.
This month, it’s all about navigating investing during the festive period.
What is the Santa Claus Rally?
The “Santa Claus Rally” is a phenomenon where stock markets historically see a rise in the last week of December and the first two trading days of January. Since 1950, the S&P 500 has posted positive returns during this period roughly 75% of the time. But why?
Some experts think it’s because of:
• Holiday cheer: Investors feel optimistic and spend more.
• Year-end tax moves: Fund managers adjust portfolios to lock in profits.
• Lower trading volumes: Fewer traders mean less volatility.
For example, in 2020, the S&P 500 gained 1.3% during the Santa Claus Rally. While not guaranteed, it’s a trend worth noting if you’re an investor.
Christmas and investing: Did you know?
1. The Dow’s “Christmas gift” of 1987
Following the infamous Black Monday crash in October 1987, the markets bounced back just in time for Christmas, with the Dow Jones Industrial Average climbing 6% in December. For many, it was a reminder to stay invested even during turbulent times.
2. Amazon's Christmas boom
In the late 1990s, Amazon’s holiday sales started catching the market’s attention. In December 1999, the company announced its biggest Christmas sales ever, sparking excitement in tech stocks and cementing e-commerce as a major investment sector.
3. Gold’s festive sparkle
Historically, December often sees a rise in gold prices as people buy jewellery and gifts. This seasonal demand creates opportunities for those investing in precious metals.
How should investors navigate the Holidays?
1. Don’t get carried away by seasonal trends
The Santa Claus Rally is interesting, but it’s not a reason to change your investment strategy. Short-term gains are unpredictable, and it’s better to focus on your long-term goals.
2. Diversify like a stocking full of treats
Think of your portfolio as a Christmas stocking—one filled with a mix of goodies! Diversification helps reduce risk, ensuring you’re not overly reliant on any single sector or trend.
3. Use the quiet time to reflect
December is often quieter for markets. It’s a perfect time to review your financial plan. Are you on track to meet your goals? Are there adjustments needed to stay aligned with your long-term strategy?
A festive reminder: It’s all about the plan
Whether the markets are experiencing a Santa Claus Rally or a post-holiday slump, the most important thing is to have a clear, goals-based financial plan. Like preparing for the holidays, investing requires planning, patience, and sometimes a little help from the experts.
Even Santa needs a bit of help
Santa doesn’t deliver presents alone—he has a team of elves to help him prepare and a carefully planned route to follow. Without that route, he’d never get to every house in one night. Similarly, in investing, financial planners help you create a goals-based financial plan, which acts like a roadmap. This plan keeps you on track, ensuring you’re investing in the right things to reach your goals. Without a plan, you might end up with a bunch of random toys—or investments—that don’t help you get where you want to go.
Remember, the best gift you can give your future self is a plan!
At Balance: Wealth Planning, we help our clients navigate markets, focus on their goals, and make confident, informed decisions. Please get in touch or book a meeting online to discuss anything mentioned in this month’s edition of Balance: Wealth Planning’s hot topics.
Please note: This update is not financial advice and is provided for information only. You should not take any action before speaking to a Financial Planner, who will confirm what suits you.
Please feel free to share it with anyone who may be interested. If you have any questions, please get in touch with your usual contact or investments@balancewealth.uk.