Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
Access both platforms from your single Saxo account.
Why selling in May isn’t always right for your portfolio
Søren Otto Simonsen
Senior Investment Editor
Summary: While “Sell in May and go away” might be a popular saying in finance, you probably need to think twice before you follow through.
“Sell in May and go away, but remember to come back in September” is – at least within the industry – a well-known saying. But what does it mean, is it generally the right thing to do, and how does the strategy look in 2023?
The origin story
The idea behind the saying is that you should sell your investments in May and reinvest in September. The saying is believed to go back hundreds of years, and some say that it’s related to a famous British horse race from the 1700’s.
The rationale behind the concept isn’t all that clear. One argument for it becoming a thing is that you shouldn’t have to worry about the markets during your summer holiday. Another is that because many people will be on vacation there’s simply fewer traders, meaning less liquidity, which in turn can create larger (irrational) market movements. Other arguments range from seasonal effects to bad performance related to year-end bonuses paid out in May.
Care, but also, don’t care
With that kind of fog covering the term it begs the question – should you even care? According to Saxo’s investment coach, Peter Siks, the saying doesn’t really make sense although it holds some merit: “You must take these kinds of sayings with a grain of salt. It is true that if you look at long-term returns in the periods May-September and October-April, the latter outperforms the former. But, obviously depending on what specifics you look at, most stock markets still have positive returns in the summer period,” he says.
In that context, Siks also notes that the act of leaving the market comes with two distinct challenges – loss of returns and added costs: “If you leave the financial market for a period, you need to make up the returns you could have gotten somewhere else. Also, exiting and re-entering the market could incur costs. Depending on where you live, a move like this could also come with tax consequences,” he says.
Is Selling in May a 2023 thing?
2023 has been a year where the markets have been completely confused in terms of whether to go up or down.
“The central banks have a tough time figuring out whether they should fight inflation or support the economy. This has meant that the market is going sideways – although it has been relatively positive lately,” Siks says.
In a market like this, Siks suggests another route for a comfortable summer than selling everything, which could make you happier down the line: “You will miss chances if you stick to selling in May and coming back in September. Instead, I'll suggest considering one (or both) of these suggestions if you want to lower your risk for summer or in general: 1) Diversify your portfolio. Bonds have become more interesting than they have in decades, so maybe it’s worth considering placing some of your savings in that. 2) Decrease your portfolio’s beta (its volatility compared to the general market) to lower the risk of your portfolio. In that way, you can hopefully enjoy your summer without worrying too much about the financial market and still benefit from upswings in the market,” he says.
The origin story
The idea behind the saying is that you should sell your investments in May and reinvest in September. The saying is believed to go back hundreds of years, and some say that it’s related to a famous British horse race from the 1700’s.
The rationale behind the concept isn’t all that clear. One argument for it becoming a thing is that you shouldn’t have to worry about the markets during your summer holiday. Another is that because many people will be on vacation there’s simply fewer traders, meaning less liquidity, which in turn can create larger (irrational) market movements. Other arguments range from seasonal effects to bad performance related to year-end bonuses paid out in May.
Care, but also, don’t care
With that kind of fog covering the term it begs the question – should you even care? According to Saxo’s investment coach, Peter Siks, the saying doesn’t really make sense although it holds some merit: “You must take these kinds of sayings with a grain of salt. It is true that if you look at long-term returns in the periods May-September and October-April, the latter outperforms the former. But, obviously depending on what specifics you look at, most stock markets still have positive returns in the summer period,” he says.
In that context, Siks also notes that the act of leaving the market comes with two distinct challenges – loss of returns and added costs: “If you leave the financial market for a period, you need to make up the returns you could have gotten somewhere else. Also, exiting and re-entering the market could incur costs. Depending on where you live, a move like this could also come with tax consequences,” he says.
Is Selling in May a 2023 thing?
2023 has been a year where the markets have been completely confused in terms of whether to go up or down.
“The central banks have a tough time figuring out whether they should fight inflation or support the economy. This has meant that the market is going sideways – although it has been relatively positive lately,” Siks says.
In a market like this, Siks suggests another route for a comfortable summer than selling everything, which could make you happier down the line: “You will miss chances if you stick to selling in May and coming back in September. Instead, I'll suggest considering one (or both) of these suggestions if you want to lower your risk for summer or in general: 1) Diversify your portfolio. Bonds have become more interesting than they have in decades, so maybe it’s worth considering placing some of your savings in that. 2) Decrease your portfolio’s beta (its volatility compared to the general market) to lower the risk of your portfolio. In that way, you can hopefully enjoy your summer without worrying too much about the financial market and still benefit from upswings in the market,” he says.
Latest Market Insights
Quarterly Outlook
-
-
Quarterly Outlook
Equity Outlook: Will lower rates lift all boats in equities?
Peter Garnry
Chief Investment Strategist
After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto... -
Quarterly Outlook
FX Outlook: USD in limbo amid political and policy jitters
Charu Chanana
Chief Investment Strategist
As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ... -
Quarterly Outlook
Macro Outlook: The US rate cut cycle has begun
Peter Garnry
Chief Investment Strategist
The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c... -
Quarterly Outlook
Commodity Outlook: Gold and silver continue to shine bright
Ole Hansen
Head of Commodity Strategy
-
Quarterly Outlook
FX: Risk-on currencies to surge against havens
Charu Chanana
Chief Investment Strategist
Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo... -
Quarterly Outlook
Equities: Are we blowing bubbles again
Peter Garnry
Chief Investment Strategist
Explore key trends and opportunities in European equities and electrification theme as market dynami... -
Quarterly Outlook
Macro: Sandcastle economics
Peter Garnry
Chief Investment Strategist
Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p... -
Quarterly Outlook
Bonds: What to do until inflation stabilises
Althea Spinozzi
Head of Fixed Income Strategy
Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ... -
Quarterly Outlook
Commodities: Energy and grains in focus as metals pause
Ole Hansen
Head of Commodity Strategy
Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...
Disclaimer
The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.
Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)