Add to watchlist:

Only registered members can add into watchlist !

Register here !
Deal Proactiveinvestors Tax Free* Losses can exceed
your initial deposit
*subject to change and depends on individual circumstances.

One of the UK's leading free websites for financial news, comment and analysis and financial tools & data, further enhanced by investor forums in London and Manchester


Sell in May regret by September

In theory, the idea of selling in May in the pre-Big Bang 24-hour trading environment seems sound.

 “Sell in May, and go away. Come back on St Leger’s Day” is a famous stock market adage that has endured for decades, despite being bad advice.

The origins of the phrase date from the time when the City was full of toffs who became more preoccupied with the social whirl in the summer – the Chelsea flower show, Wimbledon, Royal Henley, Royal Ascot, the Epsom Derby, Cowes (not necessarily in that order) , and finally the St Leger classic at Doncaster – than earning money in the stock market.

In theory, the idea of selling in May in the pre-Big Bang 24-hour trading environment seems sound. In practice, even before the Big Bang in 1986, it was about as reliable a piece of advice as you get from the average astrologer.

Using data from Datastream, the City’s foremost provider of historical financial data, I can reveal that in the 21 years before the Big Bang, there were 15 occasions when the All-Share index for the London Stock market was at a higher value in mid-September – which is when the St Leger is run – than it was at the beginning of May.

In other words, in 21 years, selling in May and coming back on St Leger’s Day would have been a money making strategy just six times.

It is true that there were occasions when the strategy worked very well; most notably in 1974, when the All Share index fell 41.6% between May and September, but that surely had far more to do with the aftermath of the three-day week in the UK when Britain was brought to its knees by a dispute between the government and the coal miners.

What’s more, pursuing the policy the following year would have meant missing out on a 107.4% increase in the stock market between May and mid-September.

After the Big Bang in October 1986, the sell in May policy has been just as flaky. Datastream’s data shows that in just 14 of the 47 years since 1966, the market was cheaper in mid-September than it was in May. That’s less than one year in three.

I am not sure it is statistically viable to do so, but taking an average of the All Share index change between May and September each year since 1966 gives an average (mean) gain of 8.1%. Comfortingly for statisticians out there, the median change is also 8.1%.

So, the numbers have spoken: To sell in May, and go away, is a strategy that does not pay. Usually.

No investment advice

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable or advisable for any specific person. You further understand that none of the information providers or their affiliates will advise you personally concerning the nature, potential, advisability, value or suitability of any particular security, portfolio of securities, transaction, investment strategy, or other matter.

You understand that the Site may contain opinions from time to time with regard to securities mentioned in other products, including company related products, and that those opinions may be different from those obtained by using another product related to the Company. You understand and agree that contributors may write about securities in which they or their firms have a position, and that they may trade such securities for their own account. In cases where the position is held at the time of publication and such position is known to the Company, appropriate disclosure is made. However, you understand and agree that at the time of any transaction that you make, one or more contributors may have a position in the securities written about. You understand that price and other data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that neither such data nor such calculations are guaranteed by these sources, the Company, the information providers or any other person or entity, and may not be complete or accurate.

From time to time, reference may be made in our marketing materials to prior articles and opinions we have published. These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current. As markets change continuously, previously published information and data may not be current and should not be relied upon.