The investment world seems to be a big fan of pithy bon mots. One is that a route to superior performance is to blindly “sell in May, stay away and return on St Leger day”. Perhaps this is due to the summer social season – traditionally a core distraction for the financial world – starting to pick up pace towards the end of May. The less cynical would point to the chart below that shows the average returns are better October to April than they are for the rest of the year.
More public holidays, summer vacations and lower volumes are all given as contributing factors but there isn’t a proven causal link between months of the year and investment performance. As such, those with a fiduciary responsibility for people’s money struggle to have conviction that the pattern will repeat each year. To have done so would have meant their clients bore the worst of the 2008 financial crisis and missed a lot of the 2009 recovery, for instance.
A little more than eight years into a bull market and with political risk plentiful it might be tempting to think that this is one year to heed the ancient wisdom. Anecdotal evidence and high fund manager cash balances suggest, in spite of low volatility, that investors are cautious rather than exuberant. Against this backdrop steady market progress seems more likely than a sudden collapse.
So rather than spending the summer cashed up and strolling around polo grounds, garden shows and regattas we think it is best spent invested looking for new ideas. We will be scouring the globe and every sector for world beaters with sustainable competitive advantages and durable business franchises. Many might look expensive now but if there is a summer shake up then that could provide a great opportunity to buy them.
George Palmer is manager of the Waverton Global Equity fund