Every December, investors eagerly anticipate a “Santa Rally,” a charming surge in stock prices that typically marks the end of the year.

This holiday season, however, might be the perfect time to consider investing in stocks and funds that promise to deliver returns well into 2025, making them a lasting gift beyond just the new year.

Even in nations where Christmas isn’t a major celebration, a December rally is a customary occurrence. According to Fidelity’s analysis, traders tend to adopt an optimistic outlook during this month, even when times are tough.

Historically, the FTSE 100 has shown positive returns in 24 of the last 30 years, while the US S&P 500 has done so in 22 instances.

Yet, December 2024 bucked this trend, largely due to worries about economic growth. This year, similar concerns are compounded by fears of a potential bubble in the artificial intelligence (AI) sector, which is a troublesome prospect for investors who would rather be celebrating with a glass of vintage champagne.

Warnings have been issued by the Bank of England and pension funds regarding the significant AI investments made by US tech giants such as Alphabet and Meta.

Festive cheer: Analysis from Fidelity shows that traders look on the bright side in December, even in challenging times

These warnings, combined with Budget fears, have led investors to pull record sums from the markets.

But if you are thinking long-term this Christmas, give yourself the present of a new strategy, suggests James Harries, co-manager of the STS Global Income & Growth Trust. 

‘As we enter 2026, the landscape has changed,’ he said. ‘Now is a time for caution – and a time to consider where tomorrow’s investment opportunities lie.’

Here are the key opportunities.

BACK BRITAIN

The UK has delivered some gratifying results this year for investors, and there could be more to come in 2026.

As Alexandra Jackson, manager of the Rathbone UK Opportunities fund, points out, the FTSE 100 has outpaced its global peers this year, returning 23 per cent including dividends, against 11.4 per cent for the S&P 500 (for sterling investors).

The S&P is home to the supposedly all-conquering AI stocks. This suggests it is worth holding onto your UK funds, since some consider the FTSE 100 undervalued, despite this year’s advance.

The FTSE 250 has delivered about 11.1pc since January. Jackson suggests this part of the market may prosper this year, thanks to bid activity and because smaller companies tend to shine when borrowing costs are falling. A base rate cut later this month seems likely.

Jackson said: ‘The FTSE 250 may not be the main gift under the tree, but it offers plenty of attractive stocking fillers.’

Rathbone UK Opportunities is one of my UK bets because its holdings range from Games Workshop, the maker of the miniature game Warhammer – whose shares have risen by 48 per cent since January – and Volution, the FTSE 250 ventilation specialist.

Shares are up by 11 per cent this year but analysts are targeting another increase to 722p. FundCalibre picks include Aberdeen UK Mid-Cap fund and Fidelity Special Values.

GO GLOBAL

Sanae Takaichi, Japan’s prime minister, will be one of the personalities to watch in 2026.

The election of Takaichi, who venerates Margaret Thatcher and loves heavy metal music, has been described as a ‘cultural seismic shock’, due to the expected impact of her policies on the nation’s stock markets.

The Nikkei 225 index hit a record last month.

Jason Hollands, of Bestinvest, recommends M&G Japan, which holds giant trading house Mitsubishi, whose share price has soared 48 per cent this year.

Hollands says that investors should also check out emerging markets, a broad category encompassing Brazil, China, Greece, Mexico, South Africa, South Korea and Taiwan.

Economic growth is expected to be strong in Asia but nations which not so long ago were considered entirely hapless are prospering. Take Greece, for example.

Omar Negyal, manager of the JP Morgan Global Emerging Markets trust, describes Greece as one of the ‘comeback stories of the decade – the country is reaping the rewards of deep reforms’.

Geopolitical tensions may make China unappealing to some investors, but Dale Nicholls, manager of Fidelity China Special Situations trust, highlights such factors as the scale of the country’s manufacturing base and its rapid adoption of AI. This trust is an Interactive Investor ‘best buy’, for the audacious.

For wider exposure, Hollands likes Ashoka WhiteOak Emerging Markets Equity, which owns Taiwan Semiconductor Manufacturing Company, the maker of microchips that are powering the AI revolution, and Samsung, the South Korean tech giant.

REASONS TO GO FOR GOLD

Gold has glittered in 2025 thanks to the search for a safe haven and the desire of China and other nations to avoid the dollar. Beijing, Turkey and others have been stashing more of their reserves into bullion, as de-dollarisation becomes fashionable.

The metal’s price dipped in October to $3,980, but it has recovered to $4,200 following forecasts of further increases in 2026.

The analysts at Deutsche have set a target of $4,450, with another rise to $5,150 in 2027. Stephen Yiu, manager of the Blue Whale fund, argues US mining giant Newmont is one of the best ways to back the de-dollarisation movement.

WHY AMERICA MAY STILL BE BEAUTIFUL

Investors have been pulling cash from US shares and funds, as a result of the controversy surrounding Alphabet, Meta and the other members of the Magnificent Seven, Amazon, Apple, Microsoft, Nvidia and Tesla.

But if you have avoided these stocks, or limited your exposure, Yiu argues that this could be the time to snap up shares in the semiconductor behemoth Nvidia, whose shares have dipped by 13 per cent over the past month.

He argues that Nvidia will be the principal beneficiary of the prodigious spending of Alphabet and the rest in AI. This expenditure – totalling $300billion-plus a year – should boost other sectors like logistics and power generation.

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THINK – VERY – DIFFERENTLY

Every year, John Hardy, Saxo Bank’s global head of macro strategy, makes a set of outrageous predictions ‘designed to stretch the imagination and sharpen debate about what could happen if things leap forward in unexpected ways’.

Among this year’s forecasts is the boost that could flow when singer Taylor Swift and American football star Travis Kelce marry next year.

Hardy suggests the wedding could encourage the couple’s millions of fans to put down their phones and concentrate on finding soulmates and building families in real life. International Monetary Fund data shows economic activity rises as screen-time drops.

Slightly more seriously, Hardy forecasts a quantum computing breakthrough that could allow hackers to crack the digital security of banks. The upgrading of systems required to counter such a threat would mean even more work for US cybersecurity specialists such as CrowdStrike.

CrowdStrike shares have increased this year by 50 per cent to $512 but most analysts still rate them a ‘buy’.

The stock could be an addition to your portfolio in 2026. Or a reminder that the best present to yourself will be diversification.

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