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Sell in May adage makes no sense for investors, Willis Owen says

Posted by Adrian Lowcock in Press releases category on 25 Apr 19

  • Analysis shows staying invested and reaping dividend rewards enhanced returns by 40% over last 33 summers
New analysis1 by Willis Owen shows that there is little point in UK investors following the traditional adage ‘sell in May and go away, don’t come back until St Leger’s Day’.

The adage recommends investors should sell their UK equities at the beginning of May then re-invest on the St Leger’s race day, normally on the middle Saturday of September, because markets tend to be quieter and their performance weaker over the summer. 

But Willis Owen’s analysis1 shows that while the FTSE 100 lost 17% over the 33 summer periods from 1986 to 2018 as an index, staying invested would have added nearly 40% to total performance if dividends were included.

Willis Owen also found that the FTSE 100 excluding dividends and charges ended down 17 out of 33 summers, or 52% of the time, between 1 May and 30 September in the years 1986 to 2018. 

While the FTSE All-Share as an index fell 20% in total during the summer months from 1986 to 2018, its total return rose to 34% if dividends were included.2

Adrian Lowcock, Head of Personal Investments at Willis Owen, commented: “The inclusion of dividends in the equation blows the sell in May adage out of the water. They transform what might appear at first sight to be a negative performance into a positive one.

“If investors take into consideration the impossibility of consistently predicting short-term trends and the costs of trading in and out of the market, then focusing on the long-term clearly becomes the best strategy. It is better for investors to keep in mind their personal goals, such as retirement, and ensure their portfolios are positioned to achieve that.”

Willis Owen’s analysis1 shows that the sell in May adage has not proved true since the summer of 2015. If investors had bet on the adage applying to the FTSE 100 over the past three years then they would have missed out on returns including dividends of 18%.

Adrian Lowcock added: “That isn’t to say sell-offs in the summer are uncommon. As such, it might be a good idea to keep some cash aside in case there is a big sell-off, which would create some potentially great investment opportunities.”

1Source: Willis Owen analysis of the performance of the FTSE 100 on Total Return and Price Return basis in pounds sterling from 1 May 1986 to 30th September 2018
2Source: Willis Owen analysis of the performance of the FTSE All Share on Total Return and Price Return basis in pounds sterling from 1 May 1986 to 30th September 2018