This is not a collection of disgruntled elves going on strike, but the phenomenon that has seen stock markets produce better returns in December than at any other time of the year.

Recent research by S&P Indices shows that all the major developed markets, including the US, UK and Hong Kong, tend to deliver higher returns in December . It concluded: “December has been, on average, around four times more profitable than the average month across these markets”. The Japanese market has shown the strongest performance in December with Germany and the UK just behind.

This suggests that the Santa rally has more legs than, say, ‘sell in May and go away’. Adrian Lowcock of AXA Wealth, says: “The Santa Rally is one of the more statistically robust trends. There is a common trend to December. The stock market rises gently in the first couple of weeks of the month before rising strongly in the last two weeks.”

AXA Wealth’s analysis shows that since the FTSE 100 was created in 1984 the index has increased by an average of 2.5 per cent during the month of December, only falling four times during the month in 28 years, the last time being December 2002. The last two weeks of the year are statistically the strongest two week period of the whole year.

The reasons behind this final bout of annual enthusiasm are hard to pinpoint. Fund managers may reposition their portfolios ahead of the year end. Everyone might simply be in a good mood and more inclined to buy stocks. They may also be arriving back from the Christmas lunch and decide they’ll have a little gamble on the market.

There has been precious little evidence of a Santa rally so far in December. The FTSE 100 started the month at a little over 6,700 and is now languishing at around 6,500. If there is going to be a rally, it needs to get going soon.

But what should investors buy? Lowcock says: “It is important investors focus on long-term trends in the markets rather than short term swings. In the long term investors will focus once again on the most important factors which determine stock market performance such as company profits and the economic outlook. He recommends investors focus on good quality managers who can add value throughout the year. He likes Old Mutual UK Alpha, run by Richard Buxton, and Schroder Tokyo run by Andrew Rose.

The bargains are mostly in areas where it feels rather uncomfortable to invest. For example, oil and mining stocks look relatively cheap, but investors may not want to bet on a rise in the oil price. Emerging markets also look relatively cheap, but there are ongoing problems in China, Russia and Brazil. Nevertheless, the F&C Investments multi-manager team, led by Rob Burdett and Gary Potter, has just been reinvesting in emerging markets through the JP Morgan Emerging Markets Income fund, managed by Richard Titherington, and the Somerset Emerging Markets Dividend Growth fund.

There is still time to take advantage of the Santa rally, but investors need to be aware that stock markets may not be as reliable as the man himself.