The Markets

This Saturday, the 14th September, will see the running of the St Leger at Doncaster, which of course is the horse end of the rhyme “sell in May and go away, and don’t come back until St Leger Day.” As an investment rhyme it is about as reliable as trying to bet on the winner itself.

This year is likely to be no different. Of course 22nd May this year was the zenith for the first half rally in many equity markets and – had you had the foresight to sell out at 6840 in the FTSE 100 on that precise date – then buying back in at current levels (6487 as I am typing), that would indeed have been a good decision. However, had you decided to sell on May 1st, then at 6451 you would have lost out!

There was a similar pattern for the Japanese Nikkei, the US S&P 500 and the German Dax indices, with the early May rally making all the difference. Frankly, unless you feel that you can confidently time the market, relying on the rhyme is just a waste of time – and more importantly, money. In the days when one no doubt enjoyed the London social season, and extended summer hols, then maybe there was some logic when seeing falling demand resulting in falling prices. However, in the days of global High Frequency Trading then the quaint illusion that the market goes off for a summer picnic is just that – an illusion.

A better adage and rhyme to remember is that “it is time in the market, not timing the market”. After all, time in the market gives the often ignored but vital strength of company dividends and their compounding; these will often account for around 50% of your return.