Sell in May and go away, don’t come back till St Legers Day?

John Bearman, Chief Investment Officer at Santander Asset Management UK looks at whether we can still apply the old adage to investment markets.

Says Bearman: “Those with an eye for the horses may be tempted to follow the advice of the old City adage ‘sell in May and go away; don’t come back till St Legers Day’ – St Legers Day being the date of a leading event in the Autumn race-goers calendar. So could this market timing strategy be a sure fire winner?

“The best advice is don’t bet on it. The theory is that markets are more likely to lose ground over the summer months when traders and brokers loosen their ties and take time out to sip Pimms on the riverbank at Henley, eat strawberries at Wimbledon and gently roast themselves on Mediterranean beaches. Only in September, when the major market players are back at their desks will activity levels begin to pick up again. The idea of a long lazy summer away from the office may be alluring but it is not something many of today’s City workers would recognise. Markets are global, highly competitive and pay no heed to the English summer social season. A company which relaxes anything other than its dress code over the summer months is not going to succeed.

“There will of course be years when the market does sell-off over the summer. This happened in 1998, 2001 and 2002. However, in other years there will be solid growth: witness 2003, 2004 and 2005. Last year, returns for the period were almost flat but anybody who got out of the market in May would have missed the opportunity to buy at the market bottom during June, after a fall of 10%.

“So if you fancy a punt, why not study the form of the 2.40 at Ascot and get yourself down the bookies? The St Legers Day adage is a quaint piece of Olde England, rolled out at on an annual basis in the financial pages of newspapers but for investors it is as useful as a clotted cream tea."