2 May 2019

Is it the selling season?

Here we are in May. Might there be any reason to take note of that old stock market adage, sell in May and go away, this year?

There is plenty of uncertainty around still, while many markets are close to all-time highs. In the case of Wall Street, their benchmark index, the S&P 500, hit a new peak recently, while our own Footsie is only around 5% below the highest level reached last year. Shares here do not look overly expensive, which is not true of America where valuation levels are demanding. Witness the sharp fall in Google’s parent’s share price when it failed to meet investor expectations recently.

The future direction of markets will depend on how things develop on a variety of fronts as we head towards summer. Trade talks between the US and China are starting again in Beijing. There is little sign of a resolution yet, but at least they are still talking and US Treasury Secretary, Steve Mnuchin, made some encouraging noises about progress. And perhaps we’ll make some progress on the Brexit front, though I’m not holding my breath.

Much of the company news we are seeing paints a somewhat mixed picture. Greene King posted a generally encouraging trading statement recently – the last under the watch of Rooney Anand as the new chief executive, Nick Mackenzie, took the reins at the beginning of May. Standard & Chartered, the bank that focusses on Asian markets, also came out with a solid set of first quarter figures. But Google disappointed and yet another care home business failed.

On the broader front we saw some mildly good economic news from Europe, with unemployment coming down and growth coming in a little higher than expectations. Meanwhile, oil has drifted down in price a little, helped by President Trump demanding more output from OPEC countries to offset the effect of sanctions on Iran. And sterling seems to be holding up remarkably well, even if it is well below the pre-referendum levels of three years ago.  

The “Sell in May” adage stems from a distant past when wealthy private investors dominated the stock market. Today investment has become an altogether more professional affair, with the investing institutions, such as pension funds, investment management groups and insurance companies calling the shots. They will not be influenced by a desire to repair to the country for a season of sporting events so, for the moment at any rate, there seems little reason to pay heed to market aphorisms   Nevertheless, it will pay to watch developments closely as the days draw longer.

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