Stock markets: Sell in May?

1 May 2003

The old adage sell in May and go away has served investors very well over the past 75 years. On top of that, April s huge stock market rally suggests it is time to deploy the old saw again.

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UK stocks enjoyed their best monthly performance in April for over five years, while European share prices rose more in one month than they have for 17 years.

During the rally, the FTSE 100 index rose by 8.6%, while the FTSE Eurotop 300 index rose by 10.6%. Financial firms, espeically life assurance companies, were among the biggest gainers. Software companies also rose strongly.

In the US, the Dow Jones Industrials Index rose by 5.7%. Since the market troughed in midMarch, major world markets have gained by more than a fifth – in line with previous bear market rallies.

According to a Banc of America study, over the past 75 years an investor who only held stocks in the S&P 500 between November and April would have enjoyed a compound average annual return of 13.6%. That compares with a 10.8% return if the stocks were held year round.

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