11 May 2023

Sell in May and go away?

Brian Tora discusses the evolution from a tradition of selling investments over the summer months, to the ‘always on’ investing culture we have today.

May has got off to an unusual start, with two short trading weeks, thanks to bank holidays. Perhaps we can now return to something approaching normality – whatever that might be – though we have a third bank holiday yet to come this month. Against this background, markets have been relatively quiet, showing a tendency to drift lower, but without any serious selling pressure. News, both corporate and economic, has generally been rather thin on the ground. The May influence seems to be gaining ground.

I have remarked before that the old adage of ‘sell in May and go away’ should not be relied on. The second line of this couplet is said to be ‘buy again St Leger day’. This says a lot about the origins of this saying. In the days before even my long career in the stock market commenced, shares were generally owned by a relatively small group of wealthy families. Come May, the London house was likely to be closed and the family would decamp to the country to enjoy ‘the season’.

Little investment activity would take place during this period, which would have included Ascot and Wimbledon, arguably ending with the classic St Leger race at Doncaster, which takes place this year in mid-September. Active stock market investors would have closed down any short term or risky investments before turning to leisure activities – hence the call to sell. But, of course, come the autumn, active investors would once again be contacting their brokers, which is perhaps why September and October can be difficult months for markets.

Today markets are dominated by professional investors acting for institutions like pension funds, insurance companies and investment management firms. They might go on holiday, but someone would always be keeping a weather eye on developments. And these days it is all too easy to maintain contact with markets and take decisions even while relaxing on a Mediterranean beach – not a good way to operate in my experience.

However, there are some developments on the macro front that could influence sentiment. The US is grappling with the problem of reaching its debt ceiling, which could have dire consequences, though this scenario is not without precedent. Back home, the pound has been on the up in anticipation of further interest rate rises. That at least is good news for holidaymakers in the investment business, both professional and amateur. Still, I would caution against staying out of the market until September.

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