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Sell shares in May and go away?
This old chestnut is an old chestnut. In the 50
years from around 1950 until the millennium it was true that to get
out of the stock market in May and not return until St Leger’s Day
(the second Saturday in September) paid off. However, there has been
little if any seasonality since we turned the 2000 corner. In the
full seven year period prior to 2008, the market started with three
years of retrenchments and then experienced four years of forward
momentum. Interestingly the FTSE 100 index ended 2007 almost exactly
where it started 2000 with the figures for May running parallel with
those of September from the year 2003. So, the statistical lesson is
do not sell up merely because we have entered the summer months. But
why has the old adage been assuaged?
One theory for a non-cyclical pattern to share prices is that
individual private shareholders no longer dominate trading. Indeed
they are in a minority both quantitively and in value. Programmed
trades (that is, computer triggered by pre-set criteria) dominate
activity and in exotic instruments that even the most experienced
private individual is loath to use. The so-called derivative market
is now huge covering, for example, spread betting and contracts for
difference. Here we are in the province of the professional trader
and the institutional investor.
When you are at one of those summer "events" from Royal Ascot,
through Wimbledon to Henley and the Test Matches, take note of the
non-fruit blackberries amongst the strawberries and cream and the
champers. That geek in the corner of the tent has not "gone away"
but is deriving something on the market at mega value.
The moral of this story is do not sell in May or indeed June or July
or August. Summer makes no noticeable impression on your shares
portfolio. Trade away like the rest of the sad crew with their
laptops in hand and the wire in the ear. For me, well I am an old
chestnut and am off to the races to blow a few quid and get mildly
sloshed and sod the shares. |
