The strategy to “sell in May and go away” was working as well as it normally does - until last week! The US markets were up four days in a row for the first time since 2009, and the FTSE 100 is back above 6,000. The question to answer now becomes: was this genuine optimism that equity markets are the place to invest or was it less about real money flow and more to do with more short term factors? I refer to the fact that last week was both the quarter and month end. It is normal for fund managers to close certain profitable trades at these moments given the prevailing tendency to watch short term investment performance. This has led us to do some back of the envelope calculations to try and determine if short covering was a partial driver of last week’s rally.
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