This time of year used to be one of the worst times to find stocks to buy. The term “sell in May and go away” is a well-worn adage, reflecting the poor returns stock markets have typically delivered during the summer months.
But it’s not a trend that applies in today’s market. In fact, investors who follow this investing strategy could be making a massive mistake.
Want to seriously boost your wealth? You may want to consider splashing the cash over the next few months.
So what’s happened?
The idea of sitting tight in May and over the summer has been turned on its head during the last decade. And it’s all down to who US voters elected as their president in that time.
IG ran the numbers, and concluded that “the S&P 500 [has] delivered far stronger returns during the traditional May to October window under Donald Trump than in other years“.
The difference is incredible, in fact. Under President Trump, the index has risen by 9.5% on average over the past 20 years between May and October. When the current Commander-in-Chief hasn’t been in office, the return’s been just 1.3%.
The S&P’s not just outperformed during this five-month window, though. On a 12-month basis, average returns have been 14.6% versus 6.8% during non-Trump years.
IG says that
while markets have experienced increased volatility through tariff and aggressive foreign policy under Trump, rapid regains have led to outperformance vs the 20-year average.
What about the FTSE 100?
So what’s the story for the London stock market during Trump years? Unfortunately, things haven’t been anywhere near as good.
In fact, IG comments that “during non-Trump years over the past two decades, the FTSE 100 has gained on average 4.7% versus an average loss of -1.4% across Trump years“.
It adds that “the ‘Sell in May’ adage has also held true for the FTSE 100 during Trump’s presidencies so far, with an average loss between May and October of -2% compared with a gain of 0.6% between November and April“.
So on this basis, investors should steer clear of UK stocks and find US shares to buy instead. Right?
Here’s what I’m doing
Not in my view. This is because London-listed companies can still deliver spectacular returns regardless of who’s in the White House
Take Games Workshop (LSE:GAW), a FTSE 100 share I hold in my portfolio. It’s delivered an average annual return of 30.6% since May 2010, a period in which there have been three different US presidents in office.
Want to know the kicker? The annual return on Games Workshop shares is more than double what the S&P 500 has provided (that’s 13.9%).
I’m confident the tabletop gaming giant can keep outperforming, too. Its market continues to grow at an electrifying pace, and Games Workshop remains well-positioned through its hugely popular Warhammer franchise. Core sales jumped 17.3% in the six months to November, latest financials showed, despite the growing threat from competitors.
And the firm is accelerating licencing of its intellectual property for film and TV, which I think will take group revenues to the next level. I plan to keep holding this share whoever is in the White House.
