Face it, trader: Santa does not exist

THERE is consensus among sane-minded adults that Santa Claus does not exist. We have – just about – come to terms with the fact that there is no jolly red-suited fellow that wriggles down the chimney and fills our stockings each year. Yet strangely there are still traders who believe in his stock market rally. They cling to the idea that he sweeps through the City the week before Christmas, lifting the FTSE skywards. But heartbreakingly the charts (below) clearly show that a quantifiable, tradeable Santa rally does not really exist.

While it is true that the last five years show a general upward trend for the FTSE somewhere around the Christmas period, pinning down its exact date is a slippery affair. Last year it was 21 December to 8 January, whereas the year before it was 29 December to New Year’s Eve. “The tendency is to point out a December move in January and say that was the Santa rally,” says Michael Hewson of CMC Markets.

David Jones of IG Index agrees: “The full extent of the rally can be 5-10 per cent over the period if you pick it off in hindsight, but if you were trying to pick the days in advance you’d be lucky to pick up a 1 per cent gain, which is nothing spectacular on a day-to-day basis.”

But Manoj Ladwa of ETX Capital is still a believer: “Of course it’s real. It starts in late October and carries on through November and December.” While the charts show a slight incline, it is hardly a run-away rally.

But this year, there is a chance Ladwa could have his FTSE festive high delivered by the sleighful. The VAT increase in January could push shoppers into buying big-ticket items before the change. This could be attractive for spread betters because retail spending is currently depressed. A consumer boom could offer plenty of potential for St. Nick to deliver.