World’s oldest Classic horse race a potential turning point for UK markets, AJ Bell has said.
“Sell in May and go away” has worked in 2022 as summer rally has faded.
AJ Bell investment director, Russ Mould, comments: “The 245th running of the St Leger is due to take place at its traditional home of Town Moor, Doncaster on Saturday and the Sheikh Mohammed-owned New London is hot favourite to win the final Classic horse race of the 2022 Flat racing season. Stock market investors will be keeping an eye on the event for different reasons, given the old saying, ‘Sell in May, go away and come back again on St. Leger day.’
“This saying is based upon how, on average, the UK’s FTSE All-Share index has historically performed best between January and April and then again after mid-September, with summer being a bit quiet by comparison.
“The UK’s FTSE All-Share has not quite stayed true to type in 2022 because it fell marginally from 1 January to 30 April, but the rule proved its worth as the summer rally has fizzled out. The All-Share is down 4.3% since 1 May.
|Average performance since 1965||2022|
|1 Jan-30 Apr||1 May-St. Leger day||St. Leger day-31 Dec||1 May-St. Leger day*|
Source: Refinitiv data. *To the close on 7 September
“Despite the overall averages, this pattern is not visible every year (investing would be far less difficult if it were). The FTSE All-Share has risen through to the end of April, dropped through to mid-September and then gained until the end of a year on just 15 occasions since 1965.
“The UK market hasn’t conformed this year either, which begs the question of what UK stock market will do for the rest of the year (and then beyond) after its weak performance in the first eight-and-a-bit months of 2022.
“Before 2022, the All-Share index had dipped in both January-April and May to the St Leger on just nine previous occasions since its inception in the early 1960s.
“In those instances, the benchmark index eked out a gain three times and on the other six it just kept on going down after the St Leger through to the end of the year.
“And there are some uncanny echoes.
“Both 1973 and 1974 were bedevilled by an oil price shock, inflation and rising interest rates, while a recession was the problem in 1990. The Fed interest rate shock roiled markets in 1994, as then chair Alan Greenspan unexpectedly raised borrowing costs much more rapidly, and steeply, than expected. The All-Share fell in 2001 and 2002 as the technology, media and telecoms bubble burst and it did so again in 2008 as the Great Financial Crisis ripped across the world. Four Fed rate hikes and geopolitical tensions, as America and Donald Trump started a trade and tariff war, tripped up UK stocks in 2018.”