Sell in May, go away and come back again on St. Leger day?

The saying “Sell in May, go away and come back again on St. Leger day” is one of the oldest of all market rules of thumb and after a tricky start to the year it is one which may attract more attention than normal as May starts

This year, the St.Leger, the world’s oldest ‘classic’ horse race, will be run at its usual venue, Doncaster’s Town Moor racecourse, on Saturday 10 September.

Looking through performance data for the FTSE All-Share stretching back to 1965 to see whether “Sell in May” has ever been worthy of consideration by investors as a strategy?

Looking at the FTSE All-Share from 1965 onwards and then splitting the year up into the performance of the index in three distinct time periods:

  • 1 January to 30 April
  • 1 May to 10 September
  • 11 September to 31 December

for each of the last 51 years

Yes, “Sell in May” has made sense on average since 1965, although note the importance of the phrase “on average”. Over the past 51 years the 1 January to 30 April period has been the most rewarding for investors, while the 1 May to 10 September has been the most challenging.

No, “Sell in May” is not a fail-safe mechanism. In the past 51 years, the market has followed the pattern prescribed by the “Sell in May” saying of rising in the first four months, then falling to September and then rallying again on just 14 occasions – so the adage doesn’t work each and every year, even if the long-run averages work out okay. Investors who sold in May would have missed out on double-digit rallies no fewer than 10 times - 1968, 1971, 1977, 1980, 1987, 1989, 1995, 2003, 2005 and most recently in 2009.

The moral of the tale is perhaps therefore investors should not try to be too cute and test out their market timing skills - in the end buying in January, selling in May and buying again in September has only worked out 27% of the time since 1965

Source: Investcentre