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Sell in May and go away, stay away till St. Leger Day?

It’s that time of year again, just before May, when we speculate about the future of the equity market. Many investors have the well-known English saying running through their minds: “Sell in May and go away, stay away till St. Leger Day”. The phenomenon also crops up in specialist literature under the name of the “Halloween effect”, and the basic idea is that it is sensible to offload shares at the beginning of May. Instead of them, according to the saying, preference should be given to bonds and deposits; you should go on vacation and put the equity market out of your mind, and then buy the shares back later. In the period lasting from the beginning of November to the end of April, share prices tend to display significantly higher growth than in other months. The St. Leger’s day that features in the original saying refers to the St. Leger Stakes, a famous horse race that has been run in Britain since 1776. The race is held on the second Saturday of September every year. While St. Leger’s day is not known to many people apart from the British and horse-racing fans, the Halloween festival held on the last day of October receives a great deal more publicity, not to mention the fact that it really is better to time your return to the market for the end of October.

There is more and more talk about this seasonality, and the idea is taking on a greater currency as time progresses, as it potentially turns into a self-fulfilling prophecy. The growing recognition of the phenomenon is well-illustrated by the fact that a Google search of the internet yields 141 million hits for the phrase “Sell in May and go away”.

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