Best shares in November and outlook for UK stock market in December

Investors have had a rough ride in 2022, but the past six weeks have given something to cheer about. Here are the highlights of the past month and a look ahead to the festive period.

After a rollercoaster ride during 2022, investors have enjoyed the thrill of a rally since mid-October, one which spilled over into November, historically a tricky month for stocks. But there has been a significant difference in performance across the regions.

Those owning stocks in the UK, mainland Europe and the Far East will have done well. After plunging to a multi-year low at the end of October, Hong Kong rallied 26% in November, while Shanghai’s SSE Composite index added almost 9%. However, the Japanese Nikkei index rose a more modest 1.3%.

German stocks jumped 8.6% for the month and France leapt 7.5%. In the UK, the beaten-up FTSE 250 was 7.1% higher and the steady FTSE 100 locked in a monthly gain of almost 6.7%. Even AIM, one of the worst performing markets anywhere in 2022, managed a jump of 5.3% in November.

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Best FTSE 100 performer in November was Sports Direct owner Frasers Group (LSE:FRAS), up almost 39% in one month and now up 16% in 2022. It was followed by three of the year’s big strugglers – Ocado Group (LSE:OCDO), JD Sports Fashion (LSE:JD.) and B&M European Value Retail SA (LSE:BME), up 31.8%, 29.4% and 26.9% respectively. The trio are still down between 35% and 63% for 2021 as a whole.

There was the usual excitement on AIM, where Harland & Wolff Group Holdings (LSE:HARL) rocketed 274%. MusicMagpie (LSE:MMAG) soared 91%, yet still trades down 88% this year.

The big US markets played second fiddle for much of the month, but an epic final session flattered performance. The Dow Jones ended November up 5.7%, the S&P 500 jumped 5.4%, while the tech heavy Nasdaq Composite turned a small loss into a 4.4% gain.

Speculation over just how high global interest rates will go before inflation is under control rumbles on. But, in a speech last night, US Federal Reserve chair Jerome Powell admitted that the size of rate rises could decrease "as soon as" December. Although he also said policy will likely remain tight "for some time," there had been a risk Powell would signal further big rate hikes, so a 3% rally for the S&P 500 was as much relief as anything else. 

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Inflation data and global central bank decisions will remain under heavy scrutiny. The Fed announces the outcome if its next policy meeting on Wednesday 14 December, followed a day later by the Bank of England. 

Will the stock market enjoy a Santa rally in 2022?

After all the political excitement of the past few months, things have cooled down, and there appear to be fewer potential banana skins in the run up to Christmas. Hope is we’re in for a period of more stable government. Let’s see.

December tends to be a period where the joys of Christmas are reflected to some degree on financial markets.

Performance of both the FTSE 100 and FTSE All-Share in December since 1986 is impressive. The pair have fallen just four times so far this century and only six times since 1986, although three of these December declines have occurred since 2014. But they’re on a run of positive returns at the moment, posting solid gains in each of the past three Decembers.

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There’s also evidence that demonstrates rallies do happen regularly in December, although timing them is more luck than judgement. interactive investor research shows that since 1998, the FTSE 100’s average rally from month low to the next high returns an average profit of 5.8% and takes just under 20 days.

The average return for the full month of December in the past 36 years is 2.4% for both FTSE 100 and FTSE All-Share, making it one of the best months of the year to be invested.