Blackfriar: Investors should have sold in May and gone away until St Leger Day

Legend has it that bankers and investors used to take their money out of the stock market in May and stay away until the St Leger Day horse race in September in order to avoid a seasonal decline in equity markets over the summer.

This movable date in September (which will take place this year on Saturday, September 14) is the flagship day of the William Hill St Leger Festival, which attracts more than 30,000 race goers to Doncaster Racecourse.

This year, following some heightened market volatility in August, investors would indeed have avoided a market drop, with the FTSE All Share falling by 1.09 per cent between 1 May and 1 September.

While selling up may have worked this year, analysis by Fidelity International found that investors would have missed out on positive returns in 18 out of 30 years if they had followed the mantra each time - disproving the theory in the long-term.

Analysis from Fidelity International reveals that “selling in May” remains as unpredictable an approach as ever.

Tom Stevenson, investment director for personal investing at Fidelity International, said: “For many, part of the thrill of a horse race is its unpredictability. For all the research and experience you might have when it comes to picking a favourite, it’s hardly a ‘dead cert’ on the day.”

He concluded that while selling up may have proven beneficial this year, these figures highlight the importance of a long-term view rather than being drawn into seasonal behaviour.

Investors who followed the adage would have lost out on a 1 per cent gain in 2018, a 4.4 per cent gain in 2017 and a 9.7 per cent gain in 2016. Mind you, they would also have avoided a 7.4 per cent loss in 2015.

Analysis by Hargreaves Lansdown shows that the St Leger adage only works 36 per cent of the time, which means that 64 per cent of the time it is better to stay put.

The research showed that investors who have sold in May have missed out on £73,000 since 1986.

Laith Khalaf, senior analyst at Hargreaves Lansdown, said investors give up valuable returns if they habitually sell in May.

This is even without calculating the costs they incur from trading their portfolio so frequently.

The research showed that statistically, it’s June that has the worst performance record of any month. Some 58 per cent of the time, June proves negative for shareholders and 42 per cent of the time it is positive. The UK stock market rises most often in December (82 per cent of the time), with April posting a strong record too (76 per cent of the time).

Surprisingly, October also has a good statistical record overall (positive 73 per cent of the time) despite its reputation for being the month when the market has had its most notable crashes. The single worst month on record was October 1987 when the market fell by 26.5 per cent.

Mr Khalaf warned that investing according to the seasons is about as advisable as using a horoscope to select your portfolio.

Mind you, bearing in mind the political melt down we are living through at the moment, maybe checking your horoscopes to try to predict the future isn’t such a bad idea.