Is a “Santa Claus” Rally imminent?


If history is any indication of the future, we see reasons to believe that the Nigerian equity market could get a Christmas rally in December. First, history shows us that the All-Share Index has averaged a return of 2.8% in the final month of the year since 1998 -second only to May which has averaged 5.3%.

Also, in the past 21 years, the market has only seen four negative monthly returns in December (specifically in 2001, 2005, 2008, 2009) – the lowest of any other month. Thus, the probability that there would be a December rally is a whopping 81.0%.

We think the market loves December because it is a month where players begin to trade their optimism about the new year. It is also a month where portfolio managers – looking to re-balance their portfolios – take a position ahead of year-end reporting’s.

Added to this, the market clearly looks attractively valued in light of the sell-off we have seen this year. This clearly offers an interesting entry-point ahead of the upcoming presidential elections and even to a multi-year recovery story.

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