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Stay away ’til St Leger Day? Don’t bet on it

Alan SteelWhere has the year gone ?  Suddenly it’s May.  And with May comes the fresh plant growth that’s such welcome news.  However to balance that along comes our weary economists, awakening from their winter slumber. As my grannie used to say “you have to take the good with the bad”. Sadly true.

Now what is it these pessimistic perennials are miserable about at this time of year?   Well it’s that oft-quoted mantra of theirs that heaps even more disquiet on average investors: “Sell in May and don’t come back ’til St Leger Day”.

Just this week I read exactly that in an investment mag favoured it seems by DIY investors desperately seeking short term trades in surefire 10X baggers while simultaneously obtaining “advice” on the cheap.

A main piece featured a columnist who happened to be an economist and pension authority (double dose of pessimism there) reassuring his readers his research supported his action to half his equity exposure down to only 30% of invested capital.  Yes, he was out by May. Whether he’ll be back on the 13th September for the big race that is said to trigger the re-buying signal is an interesting bet.

But is there any truth is his claims? Let’s take the last 16 years since the dotcom bust in 2000. How many years did it actually pay to knee jerk out in May and bet on equities again on St Leger Day? Only four…. at best.

You could argue that anybody who bought stock in September 2008 would have got out again by end February as markets continued their steep falls. And are probably still in deposit. Doh. 

But anyway, at best the May selling cult were wrong 75% of the time. Funny you don’t see that in the headlines.  

As to this year, as a contrarian I am not convinced getting out in May makes any sense again. Too many folks are still opting for safety.  No sign of exuberance or enthusiasm that goes with overvalued territory.  

St Leger

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Too much short-term thinking in evidence, not helped I suppose by Vince Cable, knighted for some inexplicable reason, reminding us in his annual prediction that a recession looms.  A stopped clock is far more reliable. 

Which brings me neatly to what’s urgent and what’s important.  Over the 44 St Legers I’ve been aware of since becoming an IFA it’s plain the vast bulk of savers coming along for advice only wanted to look at short term problems and solutions.  It’s important they’d say. Ever wondered what is the difference between urgent and important ?

Former US President Dwight Eisenhower was in no doubt.  When asked in a meeting what were his priorities as President, he said: “I have two kinds of problems: the urgent and the important.  The urgent though are not important, and the important sadly are never urgent.”

American author Rick Warren agreed with him adding: “The number one problem in society today is short term thinking.” 

This focus on perceived urgency and short termism isn’t healthy for your long term wealth. There’s hardly a week goes by without one report or another reminding us that far too many of us have hardly a bean to our name when we reach retirement. That’s what happens when you listen to pessimists. 

A study in the Wall Street Journal surveyed would-be baby boom retirees asking what kept them awake at night.  As you’d guess by that age (as I can attest) it’s not what it used to be, sadly.  

Approaching retirement,  their sleepless nights were down to either money worries (48%) or health concerns (42%).  So while science continues its progress in increasing our longevity, it can do nothing to make improvements to your wealth when you’ve already long missed the boat. 

Meanwhile, investors continue to make bad choices driven by the warnings of pessimists and an obsession with non proven mantras.  And continue to ignore what’s really important, like getting their affairs in order just in case they don’t see another St Leger Day.  

You’d be amazed how many folk don’t think it’s important enough to save their families years of distress,  never mind unwelcome tax bills in the event of their exit from this mortal coil. 

Last year HMRC pocketed £4.9 billion in Inheritance Tax thanks, I’m sure, to many non existent, or poorly worded wills.  That’s a tax windfall up 150% since 2001.  Beats by miles the returns from those missing stock market gains from May onwards every year.

 Don’t give HMRC any encouragement. Go fix it now. “Now please won’t you, please won’t you bear it mind?” as John Martyn so nicely put it.

Alan Steel is chairman of Alan Steel Asset Management

Alan Steel Asset Management is regulated by the Financial Conduct Authority. This article contains the personal views of Alan Steel and should not be construed as advice. Do check your individual circumstances with your advisers.

www.alansteel.com

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