Are happy days here again at last?

In which case, has the time come to turn back to ancient runes of wisdom, like “Sell in May and go away, buy again St Leger Day”?

This is not simply a platitude, but was for decades an investment strategy, dating back to the days when stock brokers and businessmen literally shut up shop for the summer, leaving share prices to drift slowly downwards.

Even today, there can be a grain of truth in the old adage. The company reporting and political seasons, which can both impact share prices significantly, draw to a close in May. In the weeks that follow, industrial and political bosses drift away to the beach. Europe all but shuts down in August. Surely prices are in for a sleepy time.

Yet over the past few weeks, the mood has bounced in the UK following the success of the Royal Wedding, and the US attack on the Osama bin-Laden compound has lanced a boil. With the UK elections behind us, a period of stability and consolidation should follow.

Furthermore, the latest indications are that interest rates may not have to rise until next year, which will help home owners sleep more soundly.

So will this summer buck the trend? Probably not, according to Standard Life’s global investment strategist Richard Batty, who finds little to be optimistic about the months to come. He said: “Were the Royal Wedding and news from the US market moving events? Well, in the UK the FTSE was flat and the US futures market down slightly.

“The market will rise when it sees some sign of a change in sentiment, and we have just had more reports showing consumer confidence falling again, although admittedly they were compiled before the wedding. Consumer income is being squeezed hard by a combination of increased taxes and inflation and pay freezes.

“Much of the fiscal tightening in the budget only began in April, and companies, particularly consumer-facing ones like retail, are concerned about how this will hit their profits.

“Yes, consumers may have been out buying more drinks or eating cake to celebrate the wedding, but this is money they will not be able to spend on other items, because their real income is being squeezed.”

Bryan Johnston of Brewin Dolphin agrees: “The market has no heart, it is only interested in facts. And of course, a feelgood factor accompanying the Royal wedding will help confidence.

“But the market will be more concerned about the oil price, the prospect that interest rates will rise, the sovereign debt crisis and the US deficit.”

Yet confidence, which is crucial to recovery, is starting to improve. The latest Bloomberg/YouGov Household Economic Activity Tracker, conducted after the Royal Wedding, points to the success of that event being a potential catalyst for a return to consumer optimism.

While those who took part believed the outlook is still negative, they are more positive than in March. Inflation is their main concern, with eight out of ten expecting prices to rise next year, yet homeowners were positive about the prospect for their house prices the first time since last summer, with more expecting their home values to increase over the next year than decrease

Stephan Shakespeare, chief executive of YouGov, said: “Times remain challenging but we are seeing optimism in the UK reaching its highest level in 2011. With April seeing the warmest weather on record, two four-day weekends and a Royal Wedding, this may be a turning point in consumer confidence. We will be watching keenly for the first signs that this positive trend continues in our results for May.”

In truth, the latest news on house prices is at best mixed. A Nationwide survey showed prices falling by 0.2 per cent in April, pushing them 1.3 per cent lower than a year ago. However, the trend over three months was up 0.6 per cent.

Nationwide’s chief economist, Robert Gardner, believes the market is static with little momentum in either direction: “Since November, house prices have increased in three months and fallen in three months. However, it is not unusual to see a pattern of modest monthly increases and decreases when the market is fairly static, as has been the case since last summer.”

And the UK’s biggest building society expects this pattern to continue for the rest of the year, ruling out any sharp falls, but no strong recovery either.

However, Capital Economics is less optimistic, pointing out that prices could well fall once the full force of the public sector cuts and redundancies is felt.

But Daniel Aitkenhead, of stockbrokers Killik, agrees with YouGov, that the wedding might have triggered a change of sentiment. He said: “The wedding was very good for ‘Brand Britain’. We had the Prime Minister’s wife Samantha Cameron wearing Burberry and Prince William and Kate driving away in an Aston Martin. And all this with two billion people watching.”

So what does the data show? Aegon Asset Management’s Sven Bouman and Ben Jacobsen conducted a scientific analysis of the trend of flat share prices over the summer, going back in the UK to 1694, only to conclude that it tended to be correct in 36 of the 37 developed and emerging markets they studied.

In a paper they wrote: “We investigated several possible causes for this ‘Sell in May’ effect and are able to rule out the usual explanations such as data mining, the January effect and risk explanations.

“Our results also reject the idea of some less likely explanations such as shifts in interest rates or in volume. Nor do we find that the effect is caused by sector-specific factors such as suggested in the popular press.

“We do find that there is a positive and significant relations between our three proxies for the length and timing of summer vacations and the impact of vacations on trading activity. So we are faced with the following problem: history and practice tells us that the old saying is right, while stock market logic tells us it is wrong.”

Analysts at Evolution Securities are more sceptical, pointing out that if you remove years of recession from the numbers, the market rises as often as it falls over this period.

A separate study from F&C Investments into the closing level of the blue-chip index’s shares between 30 April and 10 September (the date of the next St Leger horse race) for every year in the past decade, found there were four summers when the index climbed and six when it fell, with both the average rise and drop coming in at around 9 per cent.

When it comes to the small investor, the costs associated with selling and then buying back probably rule out making any smart timing moves.

This is particularly the case if you buy in September only to sell again in October, to avoid that other stock market superstition, the Halloween curse.

This is based on the dates of our three most spectacular market crashes, the Wall Street crash of 1929, and more recently 1987 and 2008.