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How the ‘Santa Claus rally’ could impact your back pocket

  • December 05 2019
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Invest

How the ‘Santa Claus rally’ could impact your back pocket

By Cameron Micallef
December 05 2019

Despite markets falling by around 4 per cent over the past two days, historically, the “Santa Claus rally” has led to higher returns for investors in December, an industry expert has suggested.

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How the ‘Santa Claus rally’ could impact your back pocket

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  • December 05 2019
  • Share

Despite markets falling by around 4 per cent over the past two days, historically, the “Santa Claus rally” has led to higher returns for investors in December, an industry expert has suggested.

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During the 2020 Fidelity International market outlook briefing, Fidelity’s global cross-asset investment specialist, Anthony Doyle, explained why investors might be in for a Christmas treat.

“Looking at the past 27 years of monthly returns of the S&P/ASX 200, December has been the second-best performing month in the year, with an average return of 2.0 per cent over the month,” the fund manager explained.

“In addition, 20 of the last 26 December months have seen the Australian equity market rise, with December 1993 generating a positive 8.2 return.”

Mr Doyle explained that increased holiday shopping, higher optimism and reduced participation from professional investors leaving more bullish retail investors to drive the market higher could be combining to drive the prices of assets.

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While highlighting investors might get a Christmas bonus, Mr Doyle believes the Australian economy needs a pick-up in investor spending.

“RBA governor Philip Lowe will be hoping for a strong consumer spending period over Christmas, given the reduction in the cash rate seen throughout 2019.

“In the absence of a significant fiscal boost to GDP, the RBA is hoping that eventually Australian consumers will respond to the low interest rate environment, thereby helping to support growth and higher inflation outcomes,” Mr Doyle explained.

However, Mr Doyle does not believe the Santa Claus rally will be enough to stop the economy needing a further rate reduction in 2020. 

“The more optimistic tone of global markets and a reduction in trade tensions will also help confidence in the short term, but given the current weak labour market and low rate of wage growth, it appears clear that the RBA will want to continue to cut interest rates further in 2020,” Mr Doyle concluded.

Mr Doyle has previously explained what’s wrong with the Australian economy.

How the ‘Santa Claus rally’ could impact your back pocket
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About the author

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Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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