Category: Knowledge

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May The Force Be With You

“Sell in May and go away, don’t come back till St. Leger”s day”

When trading shares was a manual process, the above investment practice undoubtedly held true 70% of the time. However in this current fast-paced, algorithmic trading world, the results obtained have become no better than 50/50. Effectively the saying is today about as true as any other old wives tale. We do however continue to make higher returns over the Winter months usually. The beginning of 2025 saw early impressive returns eliminated as Donald Trump sent the markets into a tailspin with his tariff announcements. As this behaviour doesn’t occur every year, don’t expect this year to follow traditional patterns.

Politics and Investment

In my previous blog “The stroke of a pen” I quoted Eoin Treacy who correctly deduced that “The benefit of using tariffs for the purpose of manipulating the bond market is they can be turned off with the stroke of a pen.” March was not likely to bring a market meltdown like the structural problems of the Great Financial Crisis of 2009 did. The Trump tariffs have been raised and lowered in successive waves faster than a lady of the night’s underwear. (Toned down analogy to prevent blushes) Through pronouncement after pronouncement on Truth Social, the rattle of a keyboard rather than the stroke of a pen, which have seen the markets, and also currency rise and fall quickly in response. Trying to respond by buying or selling is a fools endeavour. I believe it is important to not let our political affiliations lead our investment decisions. Many Americans sold down and ran to safety, because they were card carrying Democrats. They have missed out on the best May performance of the US markets since the release of “Pretty Woman” in 1990. Our portfolios too have surged, held back only slightly, by a weakening Dollar. I can see the Dollar weakening further, but I cannot see the Pound strengthening much further. UK debt problems look set to accelerate as the amount collected in taxes continues to fall, making investment into the UK fall.

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Market Corrections

There have been 27 market corrections since 1974. There’s no universally accepted definition of a correction, but most people consider a correction to have occurred when a major stock index, such as the S&P 500® Index or Dow Jones Industrial Average, declines by more than 10% but less than 20% from its most recent peak. It’s called a correction because historically the drop often “corrects” and returns prices to their longer-term trend. 

Even understanding that corrections do occur regularly, often doesn’t help investors with a propensity to worry to handle these setbacks. Every significant reversal from an upward trend feels like a punch to the stomach.

Regular market setbacks are a function of the system, not a glitch. Without smaller setbacks along the way, you can be sure a much larger crash will follow at some point. Usually all the factors that lead to a change in investment sentiment were already in place and accepted, until one day those same factors are perceived as unacceptable. Still we need to learn from these episodes and endeavour to understand why market confidence suddenly evaporates. I continue to read extensively and believe that one of my go to sources of information succinctly describes why the markets have been so upset, so quickly. 

Trump

On an obvious level the upset market is all down to Trump’s actions, but probably not for the reason the mainstream media has suggested. In most of the “quality” US financial press channels, Donald Trump, Elon Musk & Co are deplorables. Stirring hatred through clickbait grabs attention, accumulates viewers and readers, which brings in advertising revenue. So don’t expect a balanced view anytime soon from presenters and journalists schooled in never wasting an opportunity to present regular occurrences as complete crises. However don’t forget a large minority of the population of the US didn’t vote Republican and want to see him fail, many traders on Wall Street included. 

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38 Years and Counting

This month I celebrate 38 years since the beginning of my career. In the beginning it was purely a sales job. Armed with a suit and a rate book, I was unleashed on the great British public to spread the gospel according to Abbey Life. I was taught to sell savings plans and life assurance plans. With a little further training and an additional rate book my sales repertoire extended to “personal retirement plans” the fore-runner to personal pensions which arrived in 1988. And so it was for 10 years.

I’m proud to say that some of those initial clients are still with me today. Thank you;

Rory, Ruth, Mo, Stuart, Joan, Ruth, Dek, Janet, Tony, Robert, Belinda, John, Roy, Kim, Brian, Julie, Ken, Geri, John, Chris, Diane, John, Philip, Graeme, Wendy, John & Andy.

I lost my insurance company religion when I realised that Abbey Life was making more money than the policyholders were and became an Independent Financial Adviser in 1997. If you want to read the full career backstory you can read it here.

Privatisations.

When I joined Abbey Life, Margaret Thatcher was our Prime Minister. She was re-elected with a manifesto to sell off state owned monopolies. She dreamed of turning ordinary citizens into an army of private shareholders. Thatcher vowed no industry should remain in private ownership. Do you remember the TV advertisements to, “Tell Sid” that British Gas was to be privatised?

Those privatisations left a lasting impression on me. I managed to invest £100 here and £100 there and made a profit in the short term. I couldn’t hold on to those shares for the long term unfortunately as there were mortgages to be paid, and children to be brought up. I’ve no regrets, but……

A little recent research revealed that if you invested £1000 in British Gas on flotation –” in 2023 you would now have £40,600, of which £24,400 is due to dividends being reinvested to buy more British Gas shares”.

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