This comes from around the 1770s, when investors and British officials would go on holiday from May until the St Leger Stakes horse race, in September.
Eventually, summer became linked to subdued economic activity. The idea was that the wealthy would sell some of their shares before summer, when they were more likely to be on holiday. This pressure pushed prices down.
What about the property market? Does ‘Sell in May, go away’ affect it?
In the southern hemisphere, we often associate hotter weather with a hotter property market. In the northern hemisphere, better markets are connected to winter.
So, can our net wealth change with the weather? If so, what else affects markets?
One expression that makes sense is ‘the long-term debt cycle’.
It means a time when borrowing and spending increase too quickly. There’s too much new money racing around the system, chasing a limited number of things to buy.
Excess turns into deleveraging. People spend less on what they want, and more on what they need.
We’ve seen this before. From 2020 onwards, interest rates more than doubled and we got hit with a cost-of-living crisis, too.
Each cycle further concentrates wealth into fewer hands.
We’re all wealthier, but life’s a bit harder, too. Then the process resets. Interest rates fall, we eventually forget budgeting.
Cycles occur but here’s the sad reality – it doesn’t matter.
It’s called the efficient market hypothesis. The price we buy and sell our property or shares for already considers all known information, including superstition or patterns.
The theory suggests we can’t outsmart prices, if all the relevant information is available.
Superstitions and cycles may not matter, but here’s why they exist: Most of us think the same way, most of the time.
Without realising it, our actions have quietly synced up with actions of other people just like us.
Look at the Auckland-based boomers who were all checking out of the rat race at the same time, 10 years ago. Where did they go when they sold their homes? Tauranga!
This gammy-hipped, grey-haired millionaires’ club started a mini-property boom from Bethlehem on.
Demographic cycles affect how much property is worth, because people with something in common subconsciously move as a group. That can move markets.
Do you want more proof? Consider the brain drain as Kiwis flee the country in search of better money and greener pastures.
They go overseas, meet someone, have a family, come back and then complain about the cost of property they could have bought for half the price before they left.
Here’s where I’m heading with this.
You, me and almost everyone else are too focussed on the same thing – the next two years.
Unless we’re fixed on a long-term goal, we can’t control what we get.
The ‘sell in May, go away’ phenomenon and cycles just like it can control our future if we fail to form a strategy to reach our goals.
We create rhymes and cycles when we stare at our feet rather than looking up. We set short-term rather than long-term goals.
We fixate too much on when we plant the seed, instead of the harvest. If you’re worried a wake-up call is coming about your retirement, start working on a harvest plan.
This isn’t financial advice, but it’s smart.
Work hard, play later, earn more than you spend.
After you’ve built an emergency fund, invest the rest in the best way you can. Take care of yourself first, then then consider your kids and your grandkids. Take a long-term view.
Disclaimer: Information provided here is general in nature and should not be construed, or relied on, as a recommendation to invest in a particular financial product or class of financial product.
