3 May 2017

Roll on the St Leger

May has got off to a more comfortable start than might have been expected, given the sabre rattling taking place on the Korean peninsula and some disappointing economic growth numbers coming out of the US and here in the UK.

At home it is the way in which the cheaper pound is pushing up prices that is beginning to bite. Consumers are feeling the pinch and their ability to spend remains the key to our economic fortunes.

Company news has been broadly supportive of the market, though, but we will have to wait a little before any substantial extra economic statistics emerge. True, better than expected Purchasing Managers Indices for the manufacturing sector helped push the pound higher, but some investors will doubtless be reflecting on the fact that May can be a tricky month for markets. While shares here at home are a little off their peak, they remain close to an all time high, so some profit taking cannot be ruled out.

The origin of the old adage “sell in May and go away” may reflect an earlier era when markets were dominated by wealthy individuals who took off much of the summer to repair to their country estates and indulge themselves in “The Season”. It does sometimes seem to work, though in my experience the autumn is a trickier time for markets. Anyway, it is the professional investment manager that calls the tune on shares these days and they have a tendency to act together, which at times of stress can create additional volatility.

A well respected City editor once dismissed the community of pension fund, insurance company and investment fund managers as “pin-striped sheep”. This was more than forty years ago and he was, of course, referring to those who principally operated in the City of London, whereas today markets are driven by fund managers that are located all over the globe. While domestic concerns will influence trends, it is the geo-political upheavals that are more likely to disrupt markets.

But to return to the seasonal couplet urging investors to divest themselves of shares, the second line – not often quoted these days – refers to buying again on St Leger’s day. This classic horse race, run at Doncaster in September, traditionally marks the end of the season, so those wealthy investors would be returning to their London homes and dipping their aristocratic toes into the market. Personally, I still believe the greatest threat remains geo-political upsets. We must hope for calmer waters as the days lengthen.

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