Sell in May – STAY AWAY PAST St Leger’s Day

We’ve all heard the phrase “Sell in May, Go Away, Come Back on St Leger’s Day”.  Did it work in 2020?  Oh Yes!  But we don’t recommend the returning bit.

FTSE100 chart showing the wisdom of selling in May

The chart shows the steady drift downward of the FTSE 100 since it’s peak of 6484 on 5 June.  This morning the index opened at 5907 and is looking rather soft.

Ah but, the rest of the phrase says we should come back on St Leger’s Day, which was last Saturday?  DON’T DO IT! 

Galileo Chrome winning the St Legers (on the right). Pic from BBC.co.uk

The St Leger’s race at Doncaster was won by Galileo Chrome, but you should take the last minute banning of visitors to the meeting as your omen for the rest of 2020.

At the very best, we see the benchmark back at 6000 next spring, but there is a volume of blood to be spilt in the meantime.  Remember that the FTSE 100 companies tend to be multinationals, exposed to the global economy.  So we should examine what could go wrong and what could go right over the next few months.

Alert readers will recall that our views on Fama’s Efficient Market Hypothesis can be discerned from the article “The Efficient Market Hypothesis is Bunk”  However, it does have a useful shorthand idea that to determine market direction, one has to look for events that surprise or shock the market.  Overlaid on this, readers should remember that the market can be rather short-sighted.  So we all know that there will be a US Presidential election this winter, and further pandemic spikes.  Yet you can bet your bottom dollar that the market will take fright when they happen.  What else could go wrong? All sorts of diplomatic failures, natural disasters – and man-made ones too.  What could go right? Well, er, some people still believe in a Christmas vaccine – perhaps these folks think Santa will magic it out of thin air?  We cannot see an effective vaccine making much difference in the next two years.  Medical knowledge is growing of course, and fatalities will reduce over time, but a big breakthrough just has too many hurdles. (Unlike the St Leger, which doesn’t have any)

So more room for negatives than positives – the market is likely to trip rather than jump.  Our forecast for 6 months today, 20 March 2021, is that Footsie will be at 5800 – but we see opportunities to buy below 5000 between now and Christmas.

Disclaimer: We are just observers of complex and dynamic markets.  Do not take our views seriously!  You must always consult your specialist advisors before making any investments or sales.

PS. We took the advice ourselves and went away in May. This is our first column since St Leger’s Day. Yes thank you, we had a splendid summer!

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