As April draws to a close, should investors follow the old dictum to sell in May and go away?
Richard Stone, chief executive of The Share Centre, says Yes.
The adage says “sell in May and go away, come back on St Leger Day”. Investors should generally take a long-term view of investing and weather short-term volatility. However, with some potential short-term causes of increased volatility – continued concerns over China, difficulty reaching agreement in Opec, the EU referendum – active traders looking for shorter-term trading gains may want to sell in May and await an opportunity to return to the market. History suggests that large political events can cause short-term turmoil and negatively impact the market, but in doing so create buying opportunities. Take the EU referendum as a specific example. More active investors, as opposed to those investing little and often in long-term buy and hold positions, may want to get out of the market before the economic impact of the debate becomes too fevered (especially with polls suggesting the vote is too close to call), and then look for those buying opportunities in the aftermath of the vote later in June.
Tom Stevenson, investment director at Fidelity Personal Investing, says No.
Seasonal stock market adages have a pretty patchy record, and “sell in May and go away” is no exception. That’s not surprising. There is no logical reason why stock markets should be weaker during the summer months. We have crunched the numbers for the past 21 years and found that it is no better than a coin toss. In 11 of those years, selling in May would have left you out of pocket. Last year was a classic Sell in May year, with the All Share falling by 10 per cent from May to September. But it followed three years on the trot when it would have made sense to remain fully invested all summer. This year, the EU referendum complicates the decision. A vote to leave could hit the market hard in the short term. Remain would probably trigger a rally. Doing nothing is often the best approach, especially when the costs of frequent trading in and out of the market are factored in.