This report is not a personal recommendation and does not take into account your personal circumstances or appetite for risk.
15 May 2015
As my colleague points out, we’re already half way through this month and the ‘Sell in May and go away’ theory isn’t really working. To be fair though, it’s still early days with over three months to run for a trading adage suggesting investors avoid the stock markets over the summer to avoid losing money. However, we have some reservations about its usefulness and whether it’s really something that today’s traders should be heeding. Firstly, from a statistical standpoint while we know the date investors should ‘come back’ (the St Ledger Stakes horse race takes place on the second Saturday of September), the theory’s historical performance very much depends on which date investors ‘go away’ each May. 1st? 15th? 31st? Whichever you choose as your default looking back over the years could make a huge difference on whether the theory is considered a winner or a loser.
Secondly, traders are no longer restricted to having only Long positions. The ability to trade Short using the likes of CFDs and SpreadBetting means falling markets can also offer profitable opportunities. So why vacate the market for a third of the trading year to avoid losing money? While the adage may work out in terms of equity indices failing to deliver significant returns over the summer, what it can’t account for is the potential volatility that might be encountered and attractive trading opportunities presented which could be foolish to ignore. Look at the example of EasyJet this week. Anyone unsure about the strength of the budget airline’s outlook statement or the impact of April’s French air strikes on profits could have profited from a 10% slide in the share price. In just one day.
As I write, we’re compiling a more detailed report on this very subject which highlights the stocks that tend to do well and those that tend to do badly over the supposed ‘quiet summer months’. Make sure you sign-up to our research service to ensure you get a copy next week so you can identify some valuable trading options (both Long and Short) for the coming months.
Mike van Dulken, Head of Research
This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.
Accendo Markets considers opinions and information contained within the research to be valid when published, and gives no warranty as to the investments referred to in this material. The income from the investments referred to may go down as well as up, and investors may realise losses on investments. The past performance of a particular investment is not necessarily a guide to its future performance. Prepared by Michael van Dulken, Head of Research
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