Smart investors have given us a lot of great words of wisdom over the years. But ‘Sell in May and Go Away‘ has to be among the daftest I’ve heard.
I mean, it’s almost as silly as ‘Buy High and Sell Low‘. Well I know that’s not a real one. But it’s what a lot of people who think investing on a short-term basis like the May thing end up doing.
The idea is that markets can be weaker in the summer months. So investors should sell, and then buy back again in October.
Sell cheap shares?
But wait, we should sell Barclays on a P/E of less than five? And then expect it to get even cheaper in the next few months? I think that might just be the worst investing move of 2023.
If we sell now, I reckon we could miss a bank sector recovery. Forecasts show bank earnings rising at the fastest rate in the FTSE 100 this year. And cash from the banks looks set to get us back to dividend growth.
Inflation fall?
I think the turn might come when inflation starts to fall enough for the Bank of England (BoE) to think about cutting interest rates.
In fact, the British Retail Consortium has just said it expects retail prices to start coming down in the next few months.
It’s not just the banks that could benefit. No, I get the feel that piles of cash are poised to get back into stocks in general. And the main sign the owners are waiting for might just be an interest rate dip.
Interest rates
The BoE has a few meetings lined up between now and October. I’d hate to be out of stocks when they give the thumbs up.
And that brings me to the property market, which has slowed. Housebuilders and other property shares have fallen. But some, like Taylor Wimpey, have started to pick up again.
And UK house prices put in a surprise rise in April. It’s only 0.5%, but it’s not the fall that many expected. Nationwide reckons we could have a modest recovery as mortgage rates start to drop.
Summer results
Any upbeat results in the next few months could give some share prices a boost too. Bullish on a recovery from ASOS? Think National Grid and Imperial Brands are great long-term dividend buys?
All of those will post results in May alone.
Oh, there’s an update due from Rolls-Royce Holdings. Rolls has been one of the recovery stars of the year. And forecasts put it back in profit in 2023.
Risks ahead
All of these stocks I mention still face challenges, for sure. And we’re a good way from getting out of our economic slump. So share prices could still be volatile for some time yet.
But everywhere I look I see signs of light at the end of the tunnel. And when the mood is turning from bad to good, that could be a really bad time to sell shares.
No, I think this could be a great summer to buy shares.
