Thursday 01 May 2025 2:26 pm

Sell in May and go away: Why the old adage might be true this year

By: Elliot Gulliver-Needham

“Sell in May and go away, don’t come back until St Leger’s Day”.

The phrase is an oft-quoted investment adage, referring to the Doncaster St Leger’s Stakes horse race in mid-September, a favourite fixture in the financial world.

In the past, wealthy investors took the summer months off, causing a drop in trading activity and bringing lacklustre returns over the period.

But while most trading now happens electronically, the data shows the adage still works.

Since 1965, the UK stock market has actually tracked the trend, with the FTSE All Share index dropping an average of 0.2 per cent between 1 May and 10 September.

Last year saw a break for the Sell in May rule, with the UK’s FTSE All-Share growing 1.7 per cent across the period, despite volatility in the US and Japanese stock markets over the summer.

“This pattern is not visible every year (investing would be far less difficult if it were),” said Russ Mould, investment director at AJ Bell.

Now, analysts are warning that the rule may be coming back.

“The balance of risks does tilt in favour of that saying ringing true this year, given the huge degree of trade uncertainty, chunky downside economic growth risks, and considering how the recent relative calm on the tariff front seems to have lulled investors into a bit of a false sense of security,” said Michael Brown, senior research strategist at Pepperstone.

The chaos caused by US president Donald Trump’s tariffs, and the looming end to the 90-day pause put in place in an attempt to calm markets, is likely to significantly increase volatility during the summer, Brown said.

But Deutsche Bank analysts note that the adage has traditionally failed to hold up for US markets.

“Since 1973, the Sell in May strategy with cash would have resulted in an annualised performance of 9.2 per cent, whereas a Buy and Hold strategy would have returned 10 per cent,” the analysts said.

Jochen Stanzl, chief market analyst at CMC Markets, said the adage seemed to be losing its relevance when applied to Germany’s DAX index.

“Seasonal patterns in the DAX exhibit variations depending on the timeframe, showing peaks from June to July and troughs not occurring until early October,” he said.