This analysis looks at the historic behaviour of the FTSE 100 Index since 1984 on the days around Christmas and New Year. The days studied were:
- Days 1-3: the three trading days leading up to Christmas.
- Days 4-6: the three trading days between Christmas and New Year.
- Days 7-9: the first three trading days of the new year.
The following chart shows the average returns for these nine days around Christmas and New Year.
- The average daily change of the FTSE100 index from 1984 for all days is 0.03%; it can be seen that all nine days around Christmas and New Year have higher average returns than the average for all days.
- The strongest days are historically the two days leading up to Christmas and the two immediately following it.
- Generally, the market strength increase to the fourth day (the trading day immediately after Christmas) – this is the strongest day of the whole period, when the markets increases 81% of years since 1984 with an average rise of 0.34%. Although it should be noted that the standard deviation is the highest on this day, meaning that the volatility of returns is greatest (the index actually fell 3% on this day in 1987 and 2002).
- The weakest day in the period is the final trading day of the year – this is perhaps not surprising with traders closing positions for the year end.
- The new year generally starts strongly, but not as strong as those days of the week before.