One well known saying which always grabs the headlines at this time of the year is ‘sell in May and come back on St Ledgers Day’.

The adage has been around for centuries and originates in London where the bankers and merchants would sell all their stock in May for the summer then return to reinvest for the annual St Ledgers Day Horse Race in September.

May historically has been a volatile month, with the above-mentioned selling pressure from brokers, thus lighter trading volumes ahead of the summer months. It is also impacted by the lower amount of corporate activity that occurs post the earnings results.

However, since the turn of the century, the impact of technology and globalisation has led the above factors to diminish. As trading occurs globally all year round, there is less of a reset for the summer. Over the past two decades May hasn’t provided the negative returns that investors who implement the sell in May’ adage to their portfolios may have hoped for.

So, what happened in May 2023?

For 2023, May has been a volatile month with the macro-economic picture continuing to be uncertain.

Technology stocks have been the big winner for the month. Stock specific stories including Nvidia’s entry to the $1 trillion market cap club, together with more general positive sentiment has driven technology stock prices higher, which has benefited the US market in particular. Six stocks with a total of $9 trillion market cap have done the heavy lifting of returns within the S&P 500. These stocks now account for 25% of the index and highlight how narrow trading has been.

Another market which has been enjoying positive momentum is Japan, where new 30-year records were hit on the TOPIX and Nikkei stock exchanges in the month.

Emerging markets posted mixed results in the month. China was negative as the ‘post COVID boom’ seems to be navigating some bumps in the road. There has been less positive economic data than investors expected coming from the country which has provided a headwind.

In fixed income, yields on government bonds rose as investors started to price in fewer interest rate cuts for the near future, meaning that yields would have to stay higher for longer. The US debt ceiling debacle drove up short term yields as the risk of a US default spiked higher. Thankfully a deal looks likely to pass both houses which removes the risk of default for now. As yields moved higher in government debt, this impacted other credit markets as spreads widened.

Commodities were fighting headwinds of slowing growth and a possible recession, to end lower over the month. Oil was 10% lower and most strategic metals fell back from their higher prices due to the risks of falling demand especially out of China.

In conclusion

For the team here at MAIA, any trading strategy that means we sell down fully for a period is one that we will not participate in. We do not try to time the markets.

We believe volatility will be higher over the coming months as the macroeconomic headwinds continue to dominate sentiment. As we move closer to a global slowdown, many assets have already priced this in and so the opportunity for growth is still positive for investors who are happy to focus on the long term.

Inflation does look to have peaked and with commodity prices lower than they were and interest rates at decade highs, inflation will continue to fall globally and break through 5% in the coming months.