Those also counting their losses will be those investors who heeded the old investment adage of ‘sell in May and go away and don’t come back till St Leger Day’.
For William Hill, the losses were so acute after it pushed out the favourite to as long as 5/1 on the morning on the race, which gamblers piled into and reaped the rewards when it galloped to victory.
However, for investors who did take a punt on selling their investors in May the losses were not so acute.
During the summer months the FSTE 100 rose 2.8% (1 May to September 19) including dividends reinvested, while excluding dividends the index was up 0.99%.
Whilst these returns may seem low, Adrian Lowcock, investment director at Architas, says they are significant.
“Given the general expectation for equity markets to deliver an average return of 5% per year over the long-term it is still a significant amount of the return you would lose out on,” he says.
“The summer months have been stronger than usual this year, where the average for the FTSE 100 is 0.69% (inc dividends),” he adds.
“However it is still low compared with the winter months, so by some measures the sell in May adage held up. But as is usually the case it is never enough to justify actually selling your investments and spending the next few weeks considering where to invest.”
How true is the ‘sell in May’ adage?
Russ Mould, investment director at AJ Bell, says the sell in May philosophy has its devotees for good reason, with the saying having enough of a grain of truth in it to keep it relevant.
This is because using data going back to 1965, the average change in the FTSE All-Share index has been 7.1% between January to April, sliding right back down to 0.0% between May and September 10. It then picks back up to 2.2% between 11 September to 31 December.
However Mould notes that this exact pattern of a gain, a drop and then a gain has only been seen in 14 of the last 52 years, or basically one third of the time.
It was not one repeated in 2017, with the FTSE All-Share advancing 2% between May and early September, supplementing a 2.3% gain offered in the first four months of the year.
“Any investors who followed the old market maxim will hopefully will hopefully not feel too sore, as the FTSE 100 made awfully hard work of scratching out a 2% capital gain during the summer months,” says Mould.
“But a gain is a gain and the index’s ability to make any progress at all in the face of the ongoing Brexit negotiations, heated rhetoric between North Korea and the US and a spotty summer reporting period from UK stocks may further embolden those investors who are bullish of UK stocks.”
Darius McDermott, managing director of Chelsea Financial services, notes that the adage dates back to a time when the summers were longer (in terms of down-time, not necessarily sunny days!) and investors ‘turned-off’.
“These days we can keep up with developments 24/7,” McDermott says.
“While its markets and trading are slower and liquidity is reduced in July and August – as we saw with Provident Financial – if there is a profit warning shares can still get smashed whether investors are at their desks or not.
“There is no proof the adage works or doesn’t work – which in itself suggest there is no correlation – so investors are better off sticking to their long-term strategies in my view.”
For Mould, the question now is what will happen during the run-in to the end of the year and he says investors will have their eyes on three issues in particular; Brexit, monetary policy and corporate earnings.
In terms of Brexit he says it hard to say anything cogent or add value on the topic when the leading players themselves appear to have little idea of how negotiations are going to pan out.
“The only thing that can be said with any degree of confidence at the moment is that sterling seems to rally when it thinks a ‘soft’ Brexit with a post-2019 transitional period is coming, and weaken when it thinks a ‘hard’ Brexit is coming,” Mould says.
“But even these concepts are nebulous and relying on the skittish foreign exchange markets for a steer on other assets is probably a mug’s game.”
