The stockmarket outlook in May

5 May 2015

May is one of the worst months of the year for the stockmarket. Since 1970, May's average market return has been -0.6%, with over half the years seeing negative returns, and in a number of these years there have been sharp falls.

Since 2000, the situation has been little better: the average monthly return has been -0.5%. This makes May the third-weakest month of the year for stocks (after June and September).

For investors, the great significance of May is that it is the start of the weaker half of the year (historically the market over November to April greatly outperforms the period from May to October).

This is flagged in the market with the famous saying 'sell in May and go away'. Some short-term investors, therefore, tend to reduce exposure to the stockmarket from May.

The final trading day of the month, 29 May this year, has the distinction of being the weakest day for shares in the whole year.

The UK general election is on 7 May. Adding to the 'Sell in May' gloom, it could also add downward pressure on prices: in the month following a general election, the UK stockmarket has historically had a negative average return.

This article was written for our sister website Money Observer

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