Its not really strange heres why!
CYMER selling was needed to off set other gains.
on Elijah, portfolio manager of Robertson Stephens Value + Growth, says that tax-loss selling was a significant exacerbating factor to the market drop last week. "People underestimate [its] impact."
He adds that this year tax-loss selling was particularly dramatic since many fund managers sold positions this spring as the market fell. They had those big gains, but until late October did not have corresponding losses to offset them.
There will likely be more tax-related selling ahead. There are 159 funds whose fiscal years end in November and 656 in December, according to Morningstar. (The only other month with more than November is June, when 290 funds have fiscal year-ends.)
With so many funds closing their fiscal year in December and individuals perhaps dumping their dogs to offset three straight years of superior returns from the stock market, there is the potential for a hefty "January effect" this year. That's when poor-performing stocks, particularly small-caps, trade at artificially low prices at the beginning of the year because they were sold as tax losses late in the previous year.
"There's the potential to see more than the usual January effect [this year] because there is the potential to take advantage" of losses incurred recently after such a strong bull market, says Duncan Richardson, portfolio manager of |
