The age-old investment wisdom of selling your stocks in May and staying away until St. Leger Day in mid-September is a strategy that many investors are familiar with. This well-known adage has been passed down through generations, suggesting that taking a summer hiatus from the stock market could be beneficial due to historically lower returns during these months.
Traditionally, investors would step back during the summer, leading to a slowdown in market activity and often resulting in reduced returns. However, the landscape has shifted, especially with the heightened market volatility that has persisted since the onset of the Iran war, potentially prompting investors to consider selling off their holdings during the summer lull.
The strategy encourages investors to re-enter the market mid-September, around the time of the St. Leger Day Stakes—a prominent horse racing event in Doncaster named after the 18th-century figure Anthony St. Leger, a local army officer and politician. This timing is believed to align with a seasonal upswing in market activity.
Yet, contemporary analysts are questioning the validity of this time-honored approach. They point out that in recent years, U.S. markets have actually seen stronger returns during the summer months compared to other periods. When it comes to the FTSE 100, the results are less straightforward and vary more significantly.
With these observations in mind, perhaps it’s time to reconsider the ‘Sell in May’ mantra. Is it outdated, or is there merit in embracing what some are calling a ‘Summer of Trump’? The evolving market dynamics suggest that it may be time to adapt to new strategies and reconsider traditional investment wisdom.
Is it time to retire the Sell in May trend and welcome a ‘Summer of Trump’?
S&P 500 returns more over the summer
The S&P 500 has returned seven times more over the summer months when Trump has sat in the Oval Office than in non-Trump years, according to analysis by IG.
‘The common perception of Trump’s presidency, particularly his second term, is one of market volatility, particularly in light of last year’s tariff threats and a series of unexpected foreign policy interventions since January this year,’ says Chris Beauchamp, chief market analyst at IG.
‘However, while investors have had to ride out serious market sell-offs, rebounds have been strong, and relief moments for investors have led to rapid, significant gains across US equities’.
Data shows that between 1 May and 31 October – the traditional ‘Sell in May’ period – the S&P 500 gained on average 9.5 per cent under Trump versus a gain of just 1.3 per cent across the months during non-Trump years over the past 20 years.
The old investment saying ‘Sell in May’ may have run its course, say analysts
Last year, the ‘Sell in May’ adage would not have worked in investors’ behaviour, as the S&P 500 rose by more than 18 per cent after recovering from the tariff shocks in April.
During non-Trump years, the S&P gained 5.5 per cent between November and April, showing that ‘Sell in May’ holds when Trump has not been in office.
Overall, the US index has outperformed under the current President, with an average annual gain of 14.6 per cent versus 6.8 per cent.
Beauchamp says that Trump’s Taco trade (Trump always chickens out) has seen investors buying the dip. ‘We may yet see a ‘Summer of Trump’ trend emerge as investors cotton on.’
FTSE 100 suffers under Trump
While Trump’s tenure might have had a positive impact on the US market across the summer months, as tech giants thrive on deregulation, it’s a different picture for constituents of the FTSE 100.
The FTSE 100 has gained an average 4.7 per cent compared to an average loss of -1.4 per cent across the Trump years.
And ‘Sell in May’ still holds for London’s blue-chip index, with an average loss between May and October of -2 per cent compared with a gain of 0.6 per cent between November and April.
‘The FTSE 100 is the ultimate global traveller,’ says Angeline Ong, senior investment analyst at IG.
‘We’re talking over 80 per cent of its revenue being pulled in from outside the UK – and that’s currently its biggest liability. When trade tensions boil over, the FTSE tends to get caught in the crossfire while the S&P 500 keeps surfing that domestic wave.’
Beware timing the market
Even if the S&P and FTSE had both held onto summer gains, analysts warn that selling stocks before rebuying makes little sense.
‘[Sell in May’s] origins lie more in the former social habits of a bygone era than any robust investment principle,’ says Jason Hollands, managing director of Bestinvest.
‘Stepping out of the market can be just as likely to mean missing out on strong gains as it is to help avoid summer losses. Over short periods, markets can be unpredictable, reflecting sentiment and reacting to events. They do not run to a reliable seasonal timetable.’
If there is one saying investors should stick to, time in the market beats timing the market.
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