In the 30 years since the FTSE 100 was created, December has emerged as the best month for stock market investors. The index has only fallen four times in the final month of the year, and has proved a winner for each of the last 12 years.
According to data compiled by the UK Stock Market Almanac, the average return for December is 2.5% and the month has generated a positive return 87% of the time. And it's not just a UK phenomenon. The average monthly returns are highest in December across 70 world equity markets.
Much of the upside tends to occur during the second half of the month, typically from the 10th trading day. In fact, the final fortnight of the year has been the strongest two-week period of the entire year and includes the three strongest days of the year - the week beginning 14 December is the strongest week and 27 December is the strongest market day.
Further research by Almanac publisher Harriman House reveals that for the nine days around Christmas and New Year, the first trading day after Christmas tends to be the strongest day of all. It's risen 82% of the time since 1984 with an average daily return of 0.48%. But the last trading day before New Year is the weakest day of the festive period, inevitable, perhaps, as traders close out positions at calendar year-end.
Best performers
Ashtead Group (AHT), the equipment rental firm and constituent of Interactive Investor's Consistent Winter Portfolio, is one of the standout performers (see charts). Second-quarter results are due on Wednesday, 10 December 2014 and should be good.
Balfour Beatty (BBY) has had a bad year. A series of profits warnings and a failed merger with Carillion has left its share price at a record low. New chief executive Leo Quinn joins from Qinetiq on 1 January. Shareholders will hope he can work the same magic at Balfour as he did during his five years spent running the defence company.
Outsourcer G4S (GFS), bookie William Hill (WMH) and Witan Investment Trust (WTAN) have also acquired a reputation as December winners. The charts below covering the previous three years illustrate why. The FTSE All-Share is in red.
