- World’s oldest Classic horse race takes place on Saturday at Doncaster
- “Sell in May and go away” has not worked in 2025, thanks to a strong run from the April lows
- Final four months of the year traditionally show a gain in the FTSE All-Share and FTSE 100
“The 249th running of the St Leger is due to take place at its traditional home of Town Moor, Doncaster on Saturday and the stable of trainer Aidan O’Brien has a stranglehold on the big race, as the masterful Irishman trains three of the top four in the betting,” says AJ Bell investment director Russ Mould.
“Stock market investors will be keeping an eye on the event for different reasons, given the old saying about ‘Sell in May, go away and come back again on St. Leger day.’
“This saying is based upon how, on average, the UK’s FTSE All-Share index has historically done best between January and April and then again after mid-September, with summer being a bit quiet by comparison.
“The UK’s FTSE All-Share has not actually stayed true to type in 2025, because it has galloped higher since the post-Liberation Day lows and recorded a gain of more than 8% since 30 April.
“However, the saying survives for a reason, which is it contains more than a grain of truth.
Source: LSEG Refinitiv data. *To the close on 5 September
“This pattern is not visible every year (investing would be far less difficult if it were). The FTSE All-Share has risen through to the end of April, dropped through to mid-September and then gained until the end of a year on just 16 occasions since 1965.
“The UK market has not conformed to the traditional pattern this year, either, to beg the question of what the UK stock market will do for the rest of the year (and then beyond) after its strong performance in the first eight-and-a-bit months of 2025.
“Before 2025, the All-Share index had gained in both January-April and May to the St Leger on 22 previous occasions since its inception in the early 1960s.
“In those instances, the benchmark index progressed again in the final third of the year on sixteen occasions to record an average gain of 5.4% in the final three-and-a-half-month span. The outliers were 1977, 1980, 1989, 1991, 2014 and 2024 when (it could be argued) fears of inflation or recession, or at least a mid-cycle growth pause in the case of 2014, stalked the UK equity market, although such worries did not hold back the index on other occasions.
Source: LSEG Refinitiv data.
“Oddly, September is the most difficult month of the year for UK equities, even if October is the one that conjures up the worst nightmares because of the crashes of 1929 and 1987.
“The FTSE 100 may have a shorter lifespan than the All-Share, as its launch dates back to 1 January 1984, but it also shows, on average, the pattern of gains between January and April, a summer lull and then a final, year-ending (Santa) rally.
Source: LSEG Refinitiv data.
“The April-to-September gains recorded so far mean that the FTSE 100 is outpacing America’s Dow Jones Industrials, NASDAQ and S&P 500 indices in 2025. The British benchmark stands near all-time highs of its own, despite nagging worries over the UK’s economic and political outlook, the possible impact of American tariffs upon global growth and ongoing military conflict in both Eastern Europe and the Middle East.
“The prospect of lower interest rates from the Bank of England, should the rate of inflation start to recede again is one possible argument in favour of UK equities. Investors may also (finally?) be seeking to diversify away from the all-conquering US market, where an increased reliance upon a handful of AI-related stocks, an apparently capricious White House and historically lofty valuations are all potential concerns. Dollar weakness may also be focusing the minds of those with portfolios that have substantial US exposure and sterling can point to gains against the greenback this year.
“That said, such narratives are all well and good, but it is valuation that is the ultimate arbiter of investment return.
“The UK stock market has long since been less highly valued than its American counterpart, for a multiplicity of reasons, and the gap is still high by historic standards. The USA trades on 25 times forward earnings for 2025, according to research from S&P, while aggregate consensus analysts’ forecasts for the FTSE 100’s constituents put the British benchmark on just 15 times.
“However, that 15-times multiple is not far off long-term averages for the FTSE 100, thanks to its march to new all-time peaks, and that capital gain, combined with further modest downgrades to dividend payment estimates, means the forward yield is also less attractive than before, at 3.3% for 2025, according to analysts’ consensus forecasts.
“Share buybacks are supplementing those dividends, to take the FTSE 100’s estimated total ‘cash yield’ for the year to 5.5%, a figure that still handily beats the Bank of England base rate, the 10-year gilt yield and the prevailing rate of inflation.
“That calculation may yet provide some support to UK equities, especially as the consensus view that the Bank of England remains more likely to cut interest rates than increase them, although the benchmark 10-year gilt yield does not seem to be paying too much attention to such forecasts.
“Should yields on longer-dated maturities of government debt keep rising, investors may start to wonder whether gilts provide an increasingly attractive alternative to equities, at least for those who seek reliable income.
“Such considerations could potentially become a bit of a brake on the FTSE 100’s progress, given how its yield and earnings valuation are not quite as appealing as they were, in absolute terms and also relative to its own history, although any sign of sticky and elevated inflation could still persuade portfolio builders to stick with shares rather than fixed-income.”
