Yahoo Finance: “Here’s why the stock market’s recent selloff has been particularly bad”

Excerpt from Yahoo Finance quoting DataTrek’s Nick Colas:

…. “In what’s supposed to be “the most wonderful time of the year,” U.S. stocks have been crushed during the first few weeks in December, erasing this year’s gains and tracking to post the first down year since the financial crisis.

One of the under-appreciated explanations intensifying this month’s dramatic sell-off is money managers helping clients offset the tax liability from profitable trades by selling money-losing positions, according to a new note from Nick Colas at DataTrek.

“In a few days your clients will see a year-end statement with declining bond, stock, and commodity asset prices. Pretty much nothing worked this year… That will sting, but after a decade of gains that is a manageable issue,” Colas wrote, “But… Say you sold some large winners earlier this year as stocks began to roll over, perhaps the large-cap Tech names that everyone from hedge funds to retail investors over-weighted until recently. Those were good sales, to be sure, but in a taxable account they create a future liability and your clients will have to cut a large check to the US Treasury in April 2019″….

Read the full article here on Yahoo Finance!

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