Sell in May and go away?

May 25, 2010

“Sell in May and go away” — a strategy that implies that taking a good summer holiday is the best way to deliver returns — may seem like an out-dated axiom by which to manage a share portfolio, but research from S&P indicates that using a strategy this decade would have paid dividends.

Analysing the monthly performance of 16 European markets over the 10 year period from January 2000 to December 2009, S&P shows that the summer months are inauspicious for investing.RTXFFP2_Comp

Germany saw an average total return 0f 3.3 percent over the January to May period compared with an average loss of 1.4 percent over the June to August summer months, and a total return of 8.9 percent for the year as a whole, S&P says.

France and Italy have seen similar performance, but Finland’s markets fare the worst over the summer months with a loss of 7.2 percent between June and August on average. Even the best performing market, Denmark with a 3 percent June-August rise, sees far better gains in the first five months at 9.5 percent.

Whether this trend can hold up this year which has seen a  9.4 percent European equity loss year to date is another question altogether. There has certainly been a lot of selling in May this year — the FTSEurofirst 300  is down 10.8 percent its worst month since November 2008.

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Shouldn’t summer be a good time to invest considering that markets are at its low? Somehow beats me.

Posted by bkapilan | Report as abusive