27 May 2021

Surviving May

For decades, the idea that you should sell in May has been an important part of stock market folklore. Brian Tora gives his views on why markets in May have performed better than expected.


As May draws to a close, markets have quietened considerably. Our own FTSE 100 Share Index has so far managed to cling on above 7000, but there has been little of note to push it higher or undermine the fragile confidence that has built in the spring. At least the “sell in May and go away” message does not seem to have been appropriate this year. May can be a tricky month, though in my experience it is more likely to be the autumn that delivers unsettling market moves.

This time around, though, data has been on the side of the bulls. By and large the results season surprised on the upside, with many companies demonstrating a degree of agility that has been encouraging. And economic news has been improving, despite the fact that Covid-19 continues to ravage around the world. While the overall picture remains a little patchy, it is clear we are learning to live with the new conditions ushered in by this highly transmittable disease.

With further lockdown easing recently, we are beginning to get a feel for how consumers might be behaving as some sort of normality returns. Initial signs are encouraging. It seems that, at the beginning of the first week of looser restrictions, spending rose by some 10% above the levels recorded for the same period in 2019 – well before we’d even heard of coronavirus. This is a better result than at any time since the pandemic started.

More positive evidence comes with a survey suggesting sales in restaurants, pubs, cafes and takeaways soared during the first weekend after restrictions were eased. It is looking as though the rebound in consumer activity is happening even faster than had been expected by even the most optimistic of forecasters. There is a lot of enforced savings that can be put to good use as we try to catch up with all the things we have been missing during the past fifteen months.

These better than expected indicators are supported by lower than anticipated borrowing figures from the government. Of course, borrowing has risen to fund the measures put in place to protect the economy, but by less than was feared. Moreover, the main supplier of credit has been the Bank of England which is unlikely to be pressing for early repayment. Perhaps, just as the weather starts to improve, our economic outlook might be taking a turn for the better. May has turned out to be a better month than we might have expected.

Brian Tora, Associate

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