A Santa rally or holiday gloom?

Rising Covid cases and a hike in interest rates. But just how have markets fared?

24th December 2021 10:44

by Keith Bowman from interactive investor

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Rising Covid cases and a hike in interest rates from the Bank of England. But just how have markets fared?

In a shortened half-day UK trading session, the FTSE 100 drifted marginally higher.

Investors continue to weigh concerns for higher pandemic restrictions and tightening central bank policy against studies suggesting that the new Omicron Covid-19 variant is less likely to cause hospitalisations.

Boris Johnson’s government has so far resisted calls to tighten social distancing measures further despite rising Covid-19 case numbers. The FTSE 100 is one of the world’s best-performing markets in December so far, gaining around 4.8%.

At 7,385 points, the FTSE 100 hit a six-week high on Wednesday prior to Christmas Eve. If the index rises above 7,402.68, it will have reached a level not seen since 24 February 2020.

On the corporate front, consumer goods giant Reckitt Benckiser (LSE:RKT) announced the sale of its well-known skincare brand E45 to Karo Pharmaceuticals for £200 million.

Defence contractor Babcock International (LSE:BAB) made further progress in simplifying its business portfolio, completing the sale of its Power business for a gross cash consideration of £50 million.

Outsourcer Capita (LSE:CPI) also took similar steps, selling its AMT Sybex software business to Jonas Computing (UK) Limited for up to £40 million.

Markets in the US are closed on Christmas Eve. The S&P 500 index has gained by almost 2.3% over the last week to close at a new record high on Thursday. It fell by just under 2% the week before as investors assessed pandemic and Central Bank developments.

Collective investments

On the whole, collective investments struggled to keep up with the Santa rally, but there were some that outstripped the FTSE 100’s 4.8% return. Of the 58 UK investment trusts, 10 produced a higher return from the end of November to 23 December, according to figures from FE Analytics.

Most of the trusts that brought festive cheer to their shareholders have a bias towards, or exclusively focus on, investing in smaller companies.

At the top of the table is Strategic Equity Capital (LSE:SEC), with a return of 13%. Its share price jumped yesterday from 298p to 318p at the close of trading, a gain of 6.7%, following the news of a potential merger with rival Odyssean Investment Trust (LSE:OIT).

BMO Capital & Income (LSE:BCI) was the second-best performer, up 8.9%, followed by Henderson High Income (LSE:HHI) and Aberdeen Standard Equity Income Trust, up 7.6%, in joint third place.

Also on the list with returns above 4.8% were: Aurora Investment Trust (LSE:ARR), BlackRock Smaller Companies (LSE:BRSC), Odyssean Investment Trust (LSE:OIT), Diverse Income Trust (LSE:DIVI), JPMorgan Elect Managed Income (LSE:JPEI) and Troy Income & Growth (LSE:TIGT).

From everyone in the editorial team at interactive investor, we wish our readers a very Merry Christmas!

These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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