CONTRIBUTORS
Michael Browne
Senior Investment Strategist,
Franklin Templeton Institute
This past week had almost too much news to consider. While there was no improvement in commercial traffic through the Strait of Hormuz, central banks all came out and said, ‘we are watching; we can see the inflationary implications if it carries on,’ but they have done nothing. April was a good month for markets, which recouped some of the losses from March, even while the price of Brent crude oil continued to rise, touching US$126 at one point.
Across Europe, the evidence of growing economic weakness has gathered, as input prices are rising and business and consumer confidence is falling. So, should we follow the old London City mantra of ‘sell in May and go away and come again on St. Leger day?’ The latter is a reference to the St. Leger horse race, the final classic of the season, held on 12 September.
As it is a UK saying, let’s look at the FTSE 100 performance over this mid-year period since 2000. On average, May, June, August and September have had negative returns, with July positive. June has been the worst month, at -1.24%, with September close behind at -1.16%, but what really jumps out when looking at the averages is that October, November and December have all been positive.1
What else could be impacting this clear seasonality? First-quarter earnings reports that arrive from mid-April to mid-May likely have an impact. This year, in Europe as a whole, we are seeing a small beat at the earnings-per-share (EPS) level, mostly driven by energy and materials. But it is noticeable that the sales line is negative quarter-on-quarter. Given that two-thirds of the first quarter was before the start of the US-Iran war, this should be a warning sign that a slowdown was already detectable.2
In recent times, markets have experienced the start of the COVID-19 pandemic (February 2020), the Russia-Ukraine war (February 2022) February 2022, US tariff announcements (April 2025) and US-Iran war start (March 2026). All of these presumably should have depressed the pre-May period (and so not support the instruction of our mythical rhyme), yet these events do not seem to have mattered. Selling in May and buying at the end of September would have worked well in 2020 and 2022, but not in 2025. Last year, due to tariffs, July, August and September were all positive, as were October, November and December!
The saying and the myth are more about the year-end rally, when investors have adjusted to the bad news for any given year, rather than any great investment truism. So, whatever you do over the next few months, make sure you come back for the final quarter of the year! If the Strait of Hormuz remains shut, inflation fears grip and interest rates start to rise, then doing so at least feels like the right path to take. If resolution occurs and normality resumes, it may very well still work, as markets remain on the side of optimism today.
Parting shot
The first of May is the Labour Day holiday across the whole of Europe. It is a socialist celebration, historically beloved of the leaders east of the Iron Curtain when, during the Cold War, they would parade their military might. So, it may come as a surprise to learn that the socialist origins of May Day come from the United States, namely, the Haymarket affair, when workers in Chicago went on strike on 1 May 1886 to demand an eight-hour working day. Four days later, a bomb went off, and the police opened fire. Several labour activists were later executed, becoming known as the Haymarket Martyrs. In 1890, the day was internationalised and radicalised as International Socialist Day.
Endnotes
- Source: FTSE monthly performance data, Bloomberg. Indexes are unmanaged and one cannot directly invest in them. They do not include fees, expenses or sales charges. Past performance is not an indicator or a guarantee of future results.
- Source: Earnings Season Monitor. Morgan Stanley. 1 May 2026.
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