Go away in May, there's an election on the way

Justin Urquhart-Stewart finds an up-to-date resonance in the stock market's old adage about a seasonal lull

Stock market investors are traditionally advised "Sell in May, Go Away. Buy Again on St Leger Day". Normally I ignore all such rhymes as being as about useful as seaweed for weather forecasting. But often, and probably like the seaweed, there is a kernel of truth behind the theory.

The basis of this idea dates back to those seemingly halcyon days before Big Bang when private clients were a well-heeled select few, and the stockbroking profession was one of the best clubs in the country.

In the days when markets were run by a few gentlemen with few interruptions from "Johnny Foreigner", stock exchange trading could be conducted between 10am and 3pm, including time for a proper lunch. So life was paced carefully. After all, investment decisions must not be rushed.

Thus, come May, investments would be got up-to-date in time for the forthcoming London season - surely the most exhausting time of the year, when the City establishment decamped to Ascot, Wimbledon and Henley, where they probably met their clients anyway.

Not surprisingly, therefore, with the main market-movers away, the result was often a robust amount of inactivity, with share prices drifting lazily downwards. But what about the institutions that are so dominant these days - surely the large pension funds would have snapped up such bargains? I fear not, as they were probably in the next box at Ascot. Remember, too, that in those sepia-coloured days the fund managers were not as dominant as they are today.

But does this still apply? I suspect that it would be difficult now to find anyone willing to take the chance of leaving the investment market from May until September. If you are responsible for other people's investments it would be unacceptable to risk missing out on potential opportunities. Any one of us attempting a rakish few months on the London season would not have a position to return to after the St Leger.

More importantly, as a market we are not an isolated island, but rather are part of an international and integrated trading system. Influences will come from currencies, overseas investors and of course external political events. Thus we no longer possess the ability to put the market into a semi-comatose state. With vibrant institutions working around the clock and a greater number of more demanding shareholders, the whole structure of the market has changed.

But rather strangely, this year there may just be an argument to consider leaving the market for the moment. With all the financial data around and the external factors influencing the index, there is one overriding element dominating the market - the prospect of a general election.

If the retail recovery continues, then there may be pressure to increase interest rates at some stage, although the Chancellor will probably do all in his power to put off the day until after any poll. The result is that the market cannot see clearly which way to go. This does not mean, however, that it is going to be dull. Take-over and merger fever will no doubt continue, while we also have the two privatisations, Railtrack and British Energy, along with other new issues, to consider.

Even if the stock market pauses for breath over the forthcoming months, that does not mean there will be no opportunities for making a profit. A hot summer is no excuse to ignore investments. I am happy to let others go to the horses and put their money on the 2.30, but I would rather spot some investment favourites first, and then go on holiday.

The author is marketing manager at Barclays Stockbrokers Ltd.

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
Finacial products from our partners
Property search
This year's models: buyers have plenty of options as they try to get the money together to drive away from the dealer in a new car

Car finance options: Best way to buy a 65 plate

Sales could find another gear as the '65' registration hits the forecourts next week. Rob Griffin looks at the finance options
In too deep? Travel cover is among the benefits offered by packaged bank accounts

Claims firms blamed as complaints soar over packaged bank accounts

Many customers complained they were switched to the accounts without their knowledge

Finger on the interest rate trigger: the Bank of England

The best deals on personal loans: Peer-to-peer providers are more competitive for smaller sums

Meanwhile, high-street lenders continue to cherry-pick and be more competitive on larger loans

China stock collapse: Five things you need to know about 'Black Monday'

The market plummeted this week, losing all the gains made for the year

Which? warns sports fans about Rugby World Cup ticket scams

GetSporting.com offers deals that may be too good to be true

Could it be the time to focus on Japan? Some believe the country has no choice but to boost consumption and the economy will get back on track

Investors told to travel the world in the search for higher returns

Assets have risen in value across the board and volatility isn't going away. Rob Griffin asks where we should put our cash
As rising house prices push up demand for renting, so tenants are having to dig deeper than ever

Starter home initiative is urgently needed as rents go through the roof

Rents in England and Wales rose by 1.9 per cent in July to an average of £804

Peer-to-peer lending rates put Nisas to shame

The returns from P2P providers look more attractive than ever

Questions of Cash: Log-in problems turned eDreams booking into one-way ticket to nowhere

The company failed to provide our reader's flight ticket - or a refund

Hot property: business has been booming in estate agents this month, even though it’s the height of the summer holiday season

Heat rises for mortgage deals as UK homeowners sense a rate hike coming

The housing market should go quiet in August but instead people have been acting like cheap loans won't last. Do we really have to rush, asks Simon Read
Phones have now overtaken personal computers as the most used way of accessing the internet

Who you gonna call? The Complaints Busters

Unhappy customers have been given their own Ombudsman to help fight for them.

Undergraduates are being tempted with freebies by banks

Students should give freebies a wide berth and focus instead on cheap borrowing

An interest-free loan far outweighs the value of any of the bank's incentives

The Spanish carrier changed a reader's flight from Madrid – to a time before she was due to land

Questions of Cash: 'A connecting Vueling flight was cancelled and all my travel costs were left hanging in the air'

Our reader encountered problems when flying from London to Ibiza in May to take part in a charity ride

Complacency about rising rates could prove to be costly

Interest rates stay at 0.5% for now - but don't wait to get a better deal on your savings and mortgage

The years of ultra-low rates are coming to an end

The elderly are being targeted by fraudsters with postal scams such as fake prize draws

Fraudsters are bombarding older people with dangerous pension scams: here we reveal the warning signs

Many people are being repeatedly targeted by crooked schemes

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Collections Agent

    £14000 - £16000 per annum: Recruitment Genius: This company was established in...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + competitive: SThree: SThree are a global FTSE 250 ...

    Reach Volunteering: Trustees with Finance, Fundraising and IT skills

    Voluntary and unpaid, reasonable expenses reimbursable: Reach Volunteering: St...

    Day In a Page

    Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

    How Isis profits from destruction of antiquities

    Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
    Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

    'If we lose touch we’ll end up with two decades of the Tories'

    In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
    Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

    The Arab Spring reversed

    Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
    King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

    Academic claims King Arthur was real - and reveals where he lived

    Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
    Who is Oliver Bonas and how has he captured middle-class hearts?

    Who is Oliver Bonas?

    It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
    Earth has 'lost more than half its trees' since humans first started cutting them down

    Axe-wielding Man fells half the world’s trees – leaving us just 422 each

    However, the number of trees may be eight times higher than previously thought
    60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

    60 years of Scalextric

    Model cars are now stuffed with as much tech as real ones
    Theme parks continue to draw in thrill-seekers despite the risks - so why are we so addicted?

    Why are we addicted to theme parks?

    Now that Banksy has unveiled his own dystopian version, Christopher Beanland considers the ups and downs of our endless quest for amusement
    Tourism in Iran: The country will soon be opening up again after years of isolation

    Iran is opening up again to tourists

    After years of isolation, Iran is reopening its embassies abroad. Soon, there'll be the chance for the adventurous to holiday there
    10 best PS4 games

    10 best PS4 games

    Can’t wait for the new round of blockbusters due out this autumn? We played through last year’s offering
    Transfer window: Ten things we learnt

    Ten things we learnt from the transfer window

    Record-breaking spending shows FFP restraint no longer applies
    Migrant crisis: UN official Philippe Douste-Blazy reveals the harrowing sights he encountered among refugees arriving on Lampedusa

    ‘Can we really just turn away?’

    Dead bodies, men drowning, women miscarrying – a senior UN figure on the horrors he has witnessed among migrants arriving on Lampedusa, and urges politicians not to underestimate our caring nature
    Nine of Syria and Iraq's 10 world heritage sites are in danger as Isis ravages centuries of history

    Nine of Syria and Iraq's 10 world heritage sites are in danger...

    ... and not just because of Isis vandalism
    Girl on a Plane: An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack

    Girl on a Plane

    An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack
    Why Frederick Forsyth's spying days could spell disaster for today's journalists

    Why Frederick Forsyth's spying days could spell disaster for today's journalists

    The author of 'The Day of the Jackal' has revealed he spied for MI6 while a foreign correspondent