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'Sell in May' still works

Equity returns are seasonal, like it or not.
'Sell in May' still works

Seasonal investing has worked like a dream in the last 12 months. If you had followed the rule 'sell on May Day, buy on Halloween' you would have avoided a 2.5 per cent loss on the All-Share index last summer but bought just in time for a 26 per cent gain after inflation.

This continues a pattern. Since 1966 the All-Share index has delivered a total return after inflation of 7.9 per cent on average from Halloween to May Day, but has lost an average of 0.6 per cent from May Day to Halloween – even including dividends.

Nor is this pattern confined to the UK. Ben Jacobsen and Cherry Zhang at Massey University studied the entire history of stock markets in 114 countries and found that 87 of these had better returns from Halloween to May Day than from May Day to Halloween, with the difference being especially big in Western Europe. “The Halloween effect is a strong market anomaly,” they conclude.

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