Cycles, superstition, and strategy.
Money and life often play tricks on each other. Sometimes, some things, can happen around the same times as other things. Occasionally, superstition seems legitimate. For example, can the weather affect the share market? And do English superstitions, work the same down under?
Like, what about this one?
‘Sell in May, go away…
…then come back on St. Legers Day.’
This comes from around the 1770’s, when investors and British officials would go on an extended vacation from May, all the way until the St. Leger Stakes horse event.
Each September!
Eventually, summer became associated with subdued economic activity. From the 1930’s onwards, the phrase ‘Sell in May, then go away’, was a way to describe a mysterious cycle, synched with summer. The idea, was that wealthy individuals would sell some of their holdings before the summer months, when they were more likely to be on vacation. This season selling-pressure, pushed prices down.
Is ‘Sell in May, go away’ affecting the property market?
Let’s consider it. What’s better? Selling your house in the winter, or from September on?
Surely more buyers come out in Spring, but why is that?
In the southern hemisphere, we often associate hotter weather, with a hotter property market. In the northern hemisphere, better markets are connected to winter (as per the saying).
So our net wealth can change with the weather? If so, what other things are affecting markets?
‘The long-term debt cycle’ is an observation that carries a bit more weight. It describes a period of time when borrowing and spending increases too fast. There’s too much new money, racing around the system, chasing a limited number of things to buy. Excess devolves 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. Thank you, government, and thank you central bank for your help during this time. 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 our budgets…
Cycles occur but here’s sad realty – it doesn’t matter.
It’s called the efficient market hypothesis. The price we buy and sell our property or shares at, already considers all known information (including superstition or patterns). The theory goes, we can’t outsmart price (assuming all information is knowable).
Superstitions and cycles may not matter, but it’s important to consider why they exist: Most of us think the same, most of the time. Our actions have quietly synched up with actions of other people, ‘just like us’. For my sci-fi friends, cycles exist, because ‘We are Borg’.
Need proof?
Refer to the Auckland-based boomers, checking out of the rat-race all at the same time. Where did they go when they sold their homes around 10 years ago? Tauranga!
This gammy-hipped, grey-haired millionaire-club caused a mini-property boom from Bethlehem on. Demographic cycles affect property values, because people with something in common, subconsciously move as a group. That can move markets.
More proof?
Consider the brain drain in search of better money – a record number of Kiwi’s leaving for greener pastures. They meet someone, get pregnant, come back, and then complain about the property they could have purchased for half-price before they left.
Here’s where this goes.
You, me, and almost everyone else, are too focused on the same thing: The next 2 years.
Unless we’re laser-eyed on a long-term goal, what we get, isn’t within our control.
The ‘Sell in May, Go Away’ phenomenon, and cycles just like it, can control our future when we fail to form a strategy, to reach our goals. I want to be grateful no matter what, but I also don’t want to be force-fed ‘average’.
There’s rhymes and cycles we create when we stare at our feet (short-term thinking) rather than looking up (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 soon. Work hard, play later, earn more than you spend. After you’ve built an emergency fund, invest the rest the best you can. Take care of yourself first, then then consider your kids and your grandkids too.
You could sell it all and go travelling too, because of course, this isn’t financial advice. But it’s cold out and it’s May. If you haven’t sold by now, according to the saying, you’re not allowed to go.
If you’re ready to start planning your retirement proactively, get in touch.
