A Santa rally is a phenomenon where stock markets often rise in December as investor optimism increases towards year-end. However, it seems this December has bucked the trend, with most indexes down by around 3%. The troubles didn’t start there though.
A brief rally in late November failed to recover losses after the October budget. Then, a perfect storm of mitigating factors stopped any further growth in its tracks. Supply chain issues, takeover bids and rising energy costs strangled any hopes of recovery.
Last week’s hawkish tone from the US Federal Reserve didn’t help matters, suggesting fewer interest rate cuts next year than expected. The ripple effect of tighter US monetary policy was a punch in the gut for global markets. Hope on the horizon Not everything about the dip is negative.
Some of the decline can be attributed to a strengthening British pound, which weighs on UK-listed exporters by making products pricier overseas. And with UK government bond yields rising, investors are shifting focus away from equities. That looks bad in the short term but suggests bigger factors are at play.
As the saying goes” Could this dip be an early suggestion of a 2025 rally? There’s a chance the slowdown could lead to a stronger recovery next year. If global demand picks up – particularly from major trading partners like the US or China – export-driven sectors in the UK might benefit. Considering markets are forward-looking, I think the US Federal Reserve and Bank of E.