Is a “Santa Claus” Rally imminent?

Bearish Performance Persists In The Local Bourse
Bearish Performance Persists In The Local Bourse

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%.

Is a “Santa Claus” Rally imminent? - Brand Spur

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.