Investors gearing up to “Sell in May” this year are running the risk of missing out on returns as the UK – and global – economies continue to unlock, according to Willis Owen.
The long-standing adage “Sell in May and go away, and come on back on St. Leger’s Day” is widely followed by many investors, suggesting as it does that people should sell their equity positions at the start of May in anticipation of a wind down for markets in the summer months.
The recommendation is that investors divest their equities at the beginning of May, then re-invest on St Ledger’s race day in September, because markets are quieter and historically underperform during the summer months.
However, the data supporting this is far from clear. Over the last 34 years, Willis Owen’s analysis shows the MSCI World fell in only 13 of the 36 summer periods from 1985 to 2020.
When dividends are reinvested then investors were only better off by selling in May on nine occasions, or 26% of the time.
Adrian Lowcock, Head of Personal Investing at Willis Owen, said trying to predict when the Sell in May strategy might work was far too risky a strategy for investors.
“Investing is about far more than following theories or sayings blindly, and anyone following the Sell in May adage is taking a significant risk.
“It is simply impossible to tell what is going to happen, as evidenced last year when markets looked well set to be a classic Sell in May year, given investors were coming out of lockdowns, only for them to continue to rally through the summer months.”
Lowcock said one of the reasons Sell in May has triumphed on occasion is investors’ focus tends to shift to the important things in life, such as holidays, in the summer months. Given things have been tough for people over the past 18 months, he concedes that along with a strong desire to support pubs, restaurants and leisure attractions, that tendency to “enjoy” oneself might be stronger this year.
“The fact that markets have rebounded so strongly also means the focus has already shifted to the recovery, so investors might be less concerned about missing out on potential gains,” he said.
“However, as an investment strategy, it is far from failsafe. There are reasons to remain positive on markets. For one, confidence is high that economic activity will recovery strongly and earnings are expected to reflect that rebounding economic activity. Whilst markets are higher than they were, the cyclical and value areas are still some way off their pre-Covid levels and could benefit from further relief rallies.
“Indeed, it is better for investors to target specific goals over the longer-term rather than try to market time like this.”
Adrian Lowcock, Chris Tuite
Head of personal investing Director & Head of Consumer Finance
Willis Owen MRM London
07849 846387 020 3326 9925
Notes to Editors
Willis Owen is one of the UK’s leading online investment service providers. Founded more than 20 years ago Willis Owen now has around £1bn of funds under management and has acted as an intermediary for over 150,000 customers and hundreds of millions of pounds worth of investments,
Willis Owen Limited is authorised and regulated by the Financial Conduct Authority.
 Source: Willis Owen analysis of the performance of the MSCI World on Price Return and Total Return basis in pounds sterling from 1 May 1985 to 23rd April 2021.